No matter what anyone tells you, there’s no such thing as a 100% recession-proof stock.
Share prices go up and down. There’s nothing you can do to change that.
But there are blue-chip stocks that grow their dividends, year in and year out – even during market crashes.
Dividends are regular income payments that companies make to shareholders out of their earnings.
This means you can sleep well at night confident that your income is not only safe and secure, but also growing.
This allows you to ride out the inevitable dips in the shares you own, without panicking.
Today, I’ll prove this with three examples and give you the simple solution to sleeping well at night… Ignore the price of your shares. Focus instead on your dividends.
There Are Some Things We Can’t Go Without
The types of companies that tend to fare better during recessions are products and services that consumers can’t go without.
So if you’re looking for something “recession-proof,” that’s probably where you would look first.
First up, food.
We all have to eat and drink… even when the economy is in a slump.
And when economic times are tough, folks are forced to buy the cheapest, quickest, and easiest meals around.
No one does affordable fast food better than McDonald’s (MCD).
McDonald’s owns and operates more than 40,000 stores in more than 100 countries worldwide.
But this size, scale, and global brand awareness couldn’t stop MCD shares from heading lower during the most recent market crashes.
During the COVID-19 crash of 2020, MCD shares fell from $215 to a low of $124.
That’s a 42% plunge.
And during the Great Recession in 2008–2009, MCD shares fell 15% from $65 to $55.
Next up, where does all that excess food and waste go from MCD? Even in a recession, every household and business must throw away trash.
Waste Management (WM) is the largest non-hazardous waste operator in the world. It serves more than 21 million customers across 48 U.S. states and Canada.
Like McDonald’s golden arches, just about everyone recognizes Waste Management’s green and yellow trucks.
But during 2020, WM shares fell from $125 to $85 – a 32% drop.
And during the Great Recession, WM shares fell 42%.
Last but not least, no matter how weak or strong the U.S. economy is, investors can always count on government defense spending.
The U.S. military will always need to upgrade and restock tanks, submarines, and ammunition.
And one of the top five defense contractors for the U.S. military is General Dynamics (GD).
The world has been a dangerous place for decades. But that didn’t stop GD shares from falling 46% in the Covid crash.
And during the Great Recession, GD plunged 60%.
It doesn’t matter how necessary a company is to the economy… During a stock market crash, its share price will suffer. So if you focus on share price alone, you’ll never find a safe corner of the market.
Instead, you should focus on something else…
Dividends Rising Ever Higher
McDonald’s, Waste Management, and General Dynamics shareholders might have all seen the value of their shares drop in previous market crashes…
But there’s something that didn’t.
Guess what the dividends of the three stocks mentioned above have in common…
They continued to climb, despite any declines in the overall market or the individual stocks.
The rising stair-step pattern of a company’s dividend chart tells you the growth projection of a company no matter what the share price is doing.
Each of these companies recovered from their recent lows. And despite the recent COVID-19 sell-offs, they’ve all provided investors with solid long-term returns.
McDonald’s is up by 73% during the past five years. And it’s up by 196% over the past decade.
Waste Management is up 72% over the past five years. And it’s up 293% over the past decade.
General Dynamics is up 17.5% over the past five years. And it’s up 168% during the past decade.
And these are just price returns… they don’t factor in dividends received or reinvested by shareholders.
These companies have experienced numerous dips and eventual recoveries over the decades.
But their dividends are consistently on the rise, which means they are high quality companies with solid balance sheets and their share prices will eventually recover.
This is exactly why you need to ignore the price of your shares and instead focus on your dividends.
As long as you’ve bought a dividend blue-chip company at a good value, you can sit back and relax through the ups and downs of the market.
And if you don’t know where to start, we own more than 30 of the most reliable dividend paying stocks across our model portfolios in our Intelligent Income Investor service.
One of our portfolios is even called the SWAN (sleep well at night) portfolio. To learn more about this service and receive a free pick, click here.
There’s no need for your emotions to go up and down with a stock’s share price if its dividends are steadily climbing.
Happy SWAN investing,
Brad Thomas
Editor, Intelligent Income Daily