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3 Large-Cap, Recession-Proof Stocks To Hold During The Pandemic (And Beyond)

By xhaszzx.com (Haris Anwar/xhaszzx.com)Stock MarketsJun 01, 2020 12:48PM ET
xhaszzx.com/analysis/3-largecap-recessionproof-stocks-to-buy-during-the-pandemic-200526258
3 Large-Cap, Recession-Proof Stocks To Hold During The Pandemic (And Beyond)
By xhaszzx.com (Haris Anwar/xhaszzx.com)   |  Jun 01, 2020 12:48PM ET
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Even as the world braces for a long, deep recession and unprecedented levels of unemployment, U.S. stocks, as measured by the S&P 500 Index, have rallied for two straight months after plunging in February and March.

But despite this investor optimism, the outlook for the economy is far from sunny. COVID-19 continues to kill thousands of people globally every day, there's still no vaccine, and mandatory social-distancing rules along with shuttered business that may or may not reopen, are contributing to what is forecast to be a severe recession.

In this highly uncertain environment, where market risks are intensifying, it makes sense to add safety to one's investment portfolio by buying high-quality, large-cap, low-risk stocks which tend to outperform during the downturn phase of the market cycle.

With this in mind, we've selected the following three stocks. They should continue to produce income even during an economic recession.

1. McDonald’s

On the surface, it doesn't seem to be a good time to look favorably at the largest fast food chain in the world, McDonald’s (NYSE:MCD). Many consumers remain in lockdown and the economy is still in freeze mode. But history tells us that MCD is a good recession-proof stock.

MCD Weekly TTM
MCD Weekly TTM

The fast-food chain was among the best performers during the Great Recession of 2008 and 2009 and looks poised to repeat that accomplishment. According to stock research firm Baird:

“MCD appears to have plenty of liquidity to support its franchisees as they work through short-term sales and cash flow issues, and history suggests the McDonald’s brand contains recession-resistant qualities that should allow for better-than-average fundamental performance in 2H20/2021.” 

Another important factor that makes McDonald's a good long-term pick is the stability of its dividends. The company has raised its payout each and every year since 1976, when it first started paying dividends. It currently pays a quarterly dividend of $1.25 a share which translates into a 2.65% annual dividend yield.

After some recovery in the past two months, the Chicago-based company's stock is still down more than 14% from the pre-pandemic high. It closed at  $186.32 on Friday. This weakness provides a good entry for long-term investors waiting on the sidelines.

2. Walmart

One way to position your portfolio to better perform during times of market distress is to include companies that produce or sell products and services that are crucial to our daily lives. Giant retail companies such as Walmart (NYSE:WMT) fit this profile well.

This built-in protection makes the world’s largest brick-and-mortar grocer a great recession-proof stock. With a beta of just 0.43 (riskier stocks have a higher beta, closer to or above 1), Walmart is one of the safest mega-cap stocks available.

WMT Weekly TTM
WMT Weekly TTM

After touching a record high of around $133 in mid-April, Walmart has lost some steam in the past few weeks. It closed on Friday at $124.06, up about 4% for the year.

The growing success of its hybrid retail model—in which its massive store network and online presence come together to create a superior shopping experience for customers—is evident from the company’s recent earnings reports.

Walmart’s rock-solid dividend is an added benefit. It makes this stock a good choice to own through the market's thick and thin activity. The company has an impressive track record when it comes to returning cash to its investors.

Early this year, Walmart announced a 4% hike in its dividend, boosting the payout to $0.54 per share quarterly, for a 1.75% yield. With this increase, Walmart has raised its payout every year for the past 46 years. Regularly increased payouts provides a good hedge and protects the value of your investment from erosion by inflationary pressures.

3. Microsoft

In the technology space, Microsoft (NASDAQ:MSFT) is a strong recession-proof stock to consider. Unlike some of its sector peers, Microsoft is in a much better position to withstand the worsening economic outlook as evident from the current shelter-in-place trend.

MSFT Weekly TTM
MSFT Weekly TTM

The global lockdowns have forced millions of people to work from home, leading to increased demand for the tech giant's offerings, including cloud computing and gaming.

“As COVID-19 impacts every aspect of our work and life, we’ve seen two years’ worth of digital transformation in two months,” Microsoft Chief Executive Satya Nadella told analysts in April during the company's conference call.

The health crisis has increased the demand for Microsoft services, such as its workplace collaboration software suite, Teams that includes videoconferencing and messaging functions. It now has 75 million daily active users, more than double the number it had in early March.

In addition to this business strength during the pandemic, Microsoft also pays a rock-solid dividend. On this particular metric, Microsoft has an excellent track record. Since 2004, when it first began paying dividends, the company’s payout has swelled by more than 400%.

The continued dividend growth has been supported by a low payout ratio of 32% and strong underlying businesses. Currently, Microsoft's annual dividend yields 1.12% which translates into a quarterly payment of $0.51 per share.

During market downturns, companies that pay regular dividends are generally in a much better position to withstand the selling pressure than those that don’t. Dividend paying stocks are also less volatile in bear markets since investors aren't as likely to divest the recurring, fixed-income they provide.

3 Large-Cap, Recession-Proof Stocks To Hold During The Pandemic (And Beyond)
 
3 Large-Cap, Recession-Proof Stocks To Hold During The Pandemic (And Beyond)

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Comments (12)
chris hart
chris hart Jun 04, 2020 5:11AM ET
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I already invest in these, doesnt everyone?
Jim Horn
Jim Horn Jun 03, 2020 1:42AM ET
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why no Amazon
Joe Ruscigno
Joe Ruscigno Jun 03, 2020 1:42AM ET
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Maybe because the multiple is 6 million?
Domo The Personality
Domo The Personality Jun 01, 2020 7:10PM ET
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Didnt mention Gild!
Tom Jones
Tom Jones Jun 01, 2020 7:10PM ET
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DOA, as remdisivir isnt effective enough, it’s just all we have right now to combat covid. GILD will lose, as will ANY company that develops a safe vaccine. The revs from a vaccince won’t be sustainable, plus a vaccine will need to be priced nearly at cost for the public good, with little longer-term stock upside for the co (or cos) that develop/produce them.
Jim Horn
Jim Horn Jun 01, 2020 7:10PM ET
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regeneron is best bet
Dan White
Dan White Jun 01, 2020 5:47PM ET
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Ok. I like ABC, CSCO, and BRK-B because the economy is improving daily. The recession is nearly over.
Melissa Smith
Melissa Smith Jun 01, 2020 5:47PM ET
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It hasnt started yet
Tom Jones
Tom Jones Jun 01, 2020 5:47PM ET
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There is no recession YET, only fomo market behavior. The SPX is clearly overbought based on hope and almost no guidance. Cos providing guidance like INTU have underforned. That should tell you something about the “reopening” trade.
Rookie Trader
Rookie Trader Jun 01, 2020 2:46PM ET
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🤨🤔🧐
Rajesh Minda
Rajesh Minda Jun 01, 2020 1:48PM ET
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I see something cooking inside this article, author Haris Anwar recommendations has instead nicely planned to trap retail investors, when these stocks has already sky rocketed. I advise to stay away, instead search for those penny stocks which had not participated into 2019 rally but hammered during Pandemic.
Oliver Brooks
Oliver Brooks Jun 01, 2020 1:48PM ET
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how do you do your research?
Kd Mo
Kd Mo Jun 01, 2020 1:10PM ET
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nice pump and dump http://xhaszzx.com
Mart Bab
Rubberduck1973 Jun 01, 2020 1:10PM ET
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Strange artikel. There are recession proof stock. All this 3 are not. My question. Why write this artikel, now that markets have unrightfully rebounded to post crisis levels? Is is a scam to get dum bmoney to buy up stock, because smar tmoney forgot to exit at the right moment? Are you in a way talking up markets to the right exit point? Another point. There are a lot of piers you did not mention. Why?
john lee
john lee Jun 01, 2020 1:02PM ET
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go for the worse hit blue chips
Andres Green
Andres Green Jun 01, 2020 1:01PM ET
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i thought the recession was canceled tho
robert melton
robert melton Jun 01, 2020 1:01PM ET
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Stonks only go up.
Lawrence Abbott
Lawrence Abbott Jun 01, 2020 1:01PM ET
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not true, the recession will be verified by 2 quarters of losses, coming to find when July earnings Q2 report. 40 million unemployed, disproportionate stimulus check distributions, hyperfinflation 7 trillion dollars printed in less than 3 months, bailing out corporations that do not provide the economy any value, workers choosing unemployment over work, GDP is going to take a hard hit this year. June is, in my opinion, the last leg of this up trend. More uncertainty into election will also drop stocks. Whoever wins, the recession is coming, and we wont see a large drop, but gradual as people realize the US needs to recover slowly and recollect its composure in the workforce. Which reminds me, US/China trade war, both are losing in different ways cause world debt and the virus is making it difficult for every country out there.
Emanuel Dabah
Emanuel Dabah Jun 01, 2020 4:45AM ET
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FB MSFT GOOG AMZN AAPL are 20% of SPY ……… is it looks to you healthy economy? Is it normal? Well for me it looks like  close to the end of monopoly game.....
Derick Smith
Derick Smith Jun 01, 2020 2:40AM ET
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In 2007-2009, all the stocks you listed suffered during the great recession. They are not recession proof.
 
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