The Best Recession Stocks of June 2023
Becton, Dickinson and Company (BDX)
Dividend Yield
1.5%
5-Year Forward Growth Estimate
9.9%
10-Year Return vs S&P 500
-13.0%
Dividend Yield
1.5%
5-Year Forward Growth Estimate
9.9%
10-Year Return vs S&P 500
-13.0%
Why We Picked It
Becton, Dickinson and Company is a manufacturer and distributor of medical and surgical products, such as syringes, needles and medical disposal units.
The company’s annual EPS has risen nearly 33% over the last five years, and analysts expect almost 9% annual earnings growth over the next five years.
Declines in shares of BDX have been limited to 30% over the last decade. That may still seem like a lot, but it is much lower volatility than the majority of stocks. Even the SPDR S&P 500 ETF (SPY) has had larger declines during that period (34%).
Becton offers a decent dividend yield, and the company has been growing the dividend payout by almost 4% a year over the last five years. In fact, the company has been raising its dividend payout for more than 48 years, making it a member of the Dividend Aristocrats.
Thermo Fisher Scientific Inc. (TMO)
Dividend Yield
0.3%
5-Year Forward Growth Estimate
8.6%
10-Year Return vs S&P 500
+299.0%
Dividend Yield
0.3%
5-Year Forward Growth Estimate
8.6%
10-Year Return vs S&P 500
+299.0%
Why We Picked It
Thermo Fisher Scientific sells laboratory equipment and instruments, diagnostic products and other health-related items.
Analysts estimate TMO’s annual earnings growth should decelerate to around 5.8% over the next five years, down from a yearly growth rate of 26% over the last five years.
Where Thermo Fisher Scientific excels is its stock performance. TMO is the best-performing recession stock on our list, outperforming all the others. The company has sustained an average annual return of more than 23% over the last decade, and it’s beaten the total return of the S&P 500 by nearly 13%.
The company’s dividend game doesn’t quite match its share performance, unfortunately. It has the lowest dividend on the list at 0.3%, although it has delivered the highest dividend growth rate. Dividend payments have increased an average of nearly 15% per year over the last five years.
Merck & Company, Inc. (MRK)
Dividend Yield
5-Year Forward Growth Estimate
8.2%
10-Year Return vs S&P 500
+1.3%
Dividend Yield
2.6%
5-Year Forward Growth Estimate
8.2%
10-Year Return vs S&P 500
+1.3%
Why We Picked It
Merck is a pharmaceutical manufacturer with products and vaccines treating a wide range of diseases. The company makes pharmaceuticals for humans as well as animals.
Merck has seen steady growth over the last decade, and analysts expect that growth to continue. The company’s earnings per share (EPS) have grown by an average of 47% per year over the last five years, and analysts expect nearly 12% annual earnings growth over the next five years, the highest rate of growth on this list.
All the stocks on the list are more stable than the majority of U.S. stocks. The largest decline in MRK over the last 10 years was 28%. More than half of S&P 500 stocks have declined over 50% during that time. Even with lower volatility, MRK has managed to outpace the S&P 500 over the long term
Merck also pays a healthy dividend, and the company has increased the payout by an average of 6.7% per year over the last five years.
PepsiCo, Inc. (PEP)
Dividend Yield
2.8%
5-Year Forward Growth Estimate
7.8%
10-Year Return vs S&P 500
-6.0%
Dividend Yield
2.8%
5-Year Forward Growth Estimate
7.8%
10-Year Return vs S&P 500
-6.0%
Why We Picked It
PepsiCo is one of the world’s largest beverage and snack companies. Besides Pepsi, its biggest brands include the likes of Gatorade, Lay’s and Doritos, plus many others.
The company has sustained earnings growth of more than 15% a year over the last five years. Analysts expect this rate of earnings growth to decelerate to about 8% over the next five years. Steady growth has meant lower volatility for PEP, with the biggest decline over the last decade being 30%.
PepsiCo is the only stock on the best recession stocks list that has slightly underperformed the S&P 500 over the last decade. PepsiCo has averaged 12.1% annual gains, while the SPDR S&P 500 ETF has averaged 12.6%.
For those seeking dividends, PepsiCo has steadily grown its dividend payout for more than a decade, currently yielding 2.7%. The dividend amount increases by about 7.4% per year, on average. Like Becton, Dickinson, Pepsi is another member of the Dividend Aristocrats.
CMS Energy Corporation (CMS)
Dividend Yield
3.4%
5-Year Forward Growth Estimate
7.8%
10-Year Return vs S&P 500
-21.8%
Dividend Yield
3.4%
5-Year Forward Growth Estimate
7.8%
10-Year Return vs S&P 500
-21.8%
Why We Picked It
CMS Energy is a utility company providing electricity and natural gas to consumers in Michigan.
The company is an all-around solid performer, with annual earnings growth above 10% over the last five years and 8.2% annual growth expected over the next five years.
CMS’s largest price decline over the last decade was 30%, and the company has outperformed the S&P 500 slightly over the same time frame. Better returns for lower drawdowns are the hallmark of a good recession stock.
CMS pays one of the highest dividend yields on this list. The dividend payout has grown at an average rate of nearly 7% per year over the last five years.
Ameren Corporation (AEE)
Dividend Yield
3.1%
5-Year Forward Growth Estimate
6.9%
10-Year Return vs S&P 500
+17.9%
Dividend Yield
3.1%
5-Year Forward Growth Estimate
6.9%
10-Year Return vs S&P 500
+17.9%
Why We Picked It
Ameren Corporation is a major utility company in Missouri and Illinois, generating electricity and distributing natural gas.
Despite the choppy market in recent years, Ameren increased earnings by an average of 13.3% over the last five years. Analysts expect 6.6% yearly EPS growth over the next five years.
Volatility is in line with most of the stocks on this list, with the biggest drop in the last 10 years being 30%. The stock has performed better than the S&P 500 over the last decade as well, beating the index by an average of 1.2% per year.
AEE currently offers a strong dividend yield, and the company has steadily grown its dividend payout by an average of more than 5% per year for the last decade.
Xcel Energy Inc. (XEL)
Dividend Yield
3.3%
5-Year Forward Growth Estimate
6.4%
10-Year Return vs S&P 500
-4.0%
Dividend Yield
3.3%
5-Year Forward Growth Estimate
6.4%
10-Year Return vs S&P 500
-4.0%
Why We Picked It
Xcel is another natural gas and electricity utility, with operations in multiple states around the U.S.
The company has been growing its earnings at a rate of 6.5% per year for the last five years, and analysts expect this rate of growth to be sustained over the next five years.
XEL’s biggest decline over the last decade was 30%, and the stock has outpaced the S&P 500 by a modest amount over the the same time period.
The company’s dividend yield is the highest on our list. XEL’s dividend payout has steadily increased for more than a decade, with the average increase of around 6% over the last five years.
Danaher Corporation (DHR)
Dividend Yield
0.5%
5-Year Forward Growth Estimate
2.8%
10-Year Return vs S&P 500
+211.0%
Dividend Yield
0.5%
5-Year Forward Growth Estimate
2.8%
10-Year Return vs S&P 500
+211.0%
Why We Picked It
Danaher manufactures and sells scientific and diagnostic instruments. Danaher owns more than 20 companies with specialties in different areas of the life sciences.
The company has the lowest five-year earnings growth prospects on our list, down sharply from the more than 24% annual EPS growth seen over the last five years.
Danaher’s recent growth has helped the stock outpace the S&P 500 by an average of more than 7% per year over the last decade.
It offers a very modest dividend yield of 0.4%, but it has the second highest average dividend growth rate of 12.3%.
Amgen Inc. (AMGN)
Dividend Yield
4.0%
5-Year Forward Growth Estimate
1.7%
10-Year Return vs S&P 500
-40.8%
Dividend Yield
4.0%
5-Year Forward Growth Estimate
1.7%
10-Year Return vs S&P 500
-40.8%
Why We Picked It
Amgen is a biotechnology company that develops drugs to fight cancer, renal and inflammatory diseases as well as other diseases.
The company has generated impressive earnings growth over the last five years, averaging nearly 36% per year. Going forward, analysts expect this rate to drop to growth of only 5% per year.
In terms of price declines, Amgen is the most stable stock on our list: Its biggest price decline in the last decade is 25%. AMGN has outperformed the S&P 500 modestly over the last decade.
Amgen’s solid dividend yield makes it a good choice for income investors. The company has been growing the dividend at an impressive rate of 11% per year over the last five years.
All analysis and data are sourced from Trades That Swing, current as of June 1, 2023.
Methodology
Our list of the best recession stocks is built using strict criteria. Each of the stocks outlined above are traded on major U.S. exchanges, have a per-share price of at least $5, see daily average trading volume of over one million shares per day and also meet the following requirements:
- Low volatility. The stocks have not seen a sustained decline of more than 30% in the last 10 years, based on daily closing prices and adjusted for dividends. Only 87 stocks traded on major U.S. exchanges meet this volatility criteria—most U.S. stocks have seen much bigger declines.
- Steady profits. These companies have had positive earnings for at least seven years.
- Earnings growth. The list only includes stocks with a minimum of 3% annual EPS growth over the last five years.
- Expected future growth. It only includes stocks which—at the time the list was compiled—had at least 3% annual EPS growth expectations over the next five years.
- Keep pace with or beat the S&P 500. All stocks listed either beat the S&P 500’s total return over the last 10 years or were within 1% of the benchmark index.
While not used in the selection of the best recession stocks, dividend yield and dividend growth were also discussed. Dividends provide cash flow even when a stock is declining, and also offer a hedge against inflation.
To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates investing products.
Note: An experienced financial analyst selected the stocks above, but they may not be right for your portfolio. Before you purchase any of these stocks, do plenty of research to ensure they align with your financial goals and risk tolerance.
