The word recession nowadays is more common in economic predictions. And there are very strong reasons for economists to include this dreaded word in their comments. As the US expansion reaches its 10-year anniversary this month, the risks to this unprecedented boom grow.
The most alarming are the threat of lengthy trade wars with China and Mexico that can harm businesses and consumer spending, forcing the US central bank to lower rates and, as a result, further inflate asset prices.
A global recession could begin within nine months if President Donald Trump imposes 25% rates for an additional $ 300 billion in Chinese exports and Beijing takes revenge, Morgan Stanley said. JPMorgan Chase & Co., in a separate note this week, said the likelihood of a US recession in the second half of this year had risen from 40% to 25% a month ago.
Assuming that these assessments carry weight and we are more likely to take a recession in the coming 12 months, what are the stocks that are more resistant to this situation than others? These are our two choices:
1. Microsoft: friend for all ages
One thing you cannot ignore while choosing a stock for your long-term portfolio is the company's ability to continue paying dividends, no matter how bad the economy is doing.
Many investors confuse Microsoft (NASDAQ 🙂 for a pure technology exchange, which could be seriously damaged if growth slows or the recession strikes. In our opinion, however, Microsoft is a source of income from safe havens that you must hold to keep the money inside.
The company has captured no less than 82% of the desktop operating system market, generating huge amounts of recurring cash for the producer of software, services and devices. Office, now a subscription-based service for millions of Microsoft users at home and for businesses, remains a powerful source of income. In the last fiscal year, these two units alone accounted for more than half of Microsoft's total revenue.
If you are an income investor, you must have companies such as Microsoft in your portfolio. These are the giants who have the power to defend their businesses and continue to pay for the rest of your life. In this volatile environment, in which many top technology stocks are struggling, Microsoft is continuing its upward journey. The share has so far increased by 21% this year, after rising by 464% in the last ten years. The stock closed 2.8% yesterday, at $ 123.16.
Microsoft has an excellent reputation when it comes to rewarding investors. Since 2004, when it started paying a dividend, the company's payout has dropped nearly five times. The dividend growth was supported by a low payout ratio and strong underlying businesses.
With an annual dividend yield of 1.46%, Microsoft pays a quarterly dividend of $ 0.46 per share. That return may seem small to many investors, but Microsoft is still growing, but also offers great upside potential. Including dividend payments, Microsoft has delivered 200% of the total return in the last five years
No one can tell you how the next five years will unfold, but if you want to play it safely in the technical room, Microsoft is one of the best bets.
2. Procter & Gamble: Stodgy … But Secure
Procter & Gamble (NYSE 🙂 is one of those stocks that barely gets any coverage in the press and rarely boast about diners. But just like Microsoft, P & G is a large stock that is recession-proof.
& # 39; The world's largest consumer products company is one of the largest dividend payers in the industry. The maker of Dawn dishwashing detergent and Pampers has increased his dividend for 62 consecutive years. In the past 128 years it has never stopped paying money, even during recessions, wars and droughts.
With a current dividend yield of 2.9%, the P&G shares pay approximately $ 0.74 per share each quarter. This remarkable history of payouts makes this consumer base a reliable player for those who want to protect their portfolios against economic shocks.
Another advantage of owning P & G is that in times of extreme volatility, when highly cyclical growth stocks suffer the most, slower consumer goods beat stocks. Over the past month, P & G has outperformed the reference index over the past month, barely on the move when
decreased by approximately 5%. The shares have increased by 96% in the last 10 years and by 15% since the beginning of this year. They closed 0.9% at $ 104.68 yesterday.
Bottom Line
Microsoft and P & G are the type of shares that you can rely on in both good and bad times. Both companies have a broad moat, recurring cash flows and a history of rewarding their investors. If you have bought these shares, there is no reason to panic and sell. In fact, any short-term weakness in these names should give you an option to add more to your positions.
