Recession-Proof Income: 3 Stocks With 100% Dividend Coverage Ratios

  • These three high dividend coverage stocks provide high income and can withstand economic downturns.
  • Alliance Resource Partners (ARLP): Coal-producing firm with an 11.5% indicated dividend yield.
  • Cal-Maine (CALM): The largest egg producer in the United States had positive returns in 2008.
  • Avista (AVA): Utility company with a 5.5% indicated dividend yield.
High Dividend Coverage Stocks - Recession-Proof Income: 3 Stocks With 100% Dividend Coverage Ratios

Source: iQoncept/

Stocks that can provide high dividend income and withstand recessions are valuable tools in investor portfolios, especially if they are high dividend coverage stocks. High dividend coverage ratios indicate that a firm has enough earnings to make good on the dividend payments it’s committed to. They also help show whether a firm might be able to increase its dividend in the future.

This article will detail firms that meet the criteria of having high dividend yields and high coverage ratios. They also performed well in 2008 relative to the S&P 500, a proxy for recession-proof performance. I will use indicated dividend yield to measure dividends, which is a forward-looking measurement of dividend yield. All return, dividend yield, and dividend coverage ratio data are from Koyfin unless otherwise cited.

Some sectors that tend to perform well in recessions and have lower correlations to the market are consumer staples, utilities, and energy. This is because demand for these products is relatively inelastic. Even in recessions, people need basic food, to heat their homes and drink water, and drive their cars. All these things are necessities, giving these industries recession-resistant characteristics. My stock picks will cover each of these sectors.

Alliance Resource Partners (ARLP)

A magnifying glass zooms in on the logo for Alliance Resource Partners, L.P. (ARLP)
Source: Pavel Kapysh /

First on the list of high dividend coverage stocks is Alliance Resource Partners (NASDAQ:ARLP). Alliance is an energy company that generates revenue from its coal operations as well as through oil and gas royalties. It is the largest coal producer in the eastern United States, operating primarily in the Illinois Basin and Appalachia. The company sold 34.4 million tons of coal in 2023. With approximately 1.7 billion tons of coal reserves and resources, it could sell coal for 50 years until those resources dry up.

The company provides incredible income, with an indicated 11.5% dividend yield. It has a dividend coverage ratio of 166%. This means the firm’s earnings can pay for 166% of the dividend it pays out. This leaves ample room for the company to increase its dividend further in the future. The company performed relatively well in the recession of 2008, with shares down 26% for the year, compared to a -38% return for the S&P 500.

Although concerns remain about the phasing out of coal, which could hurt the firm, it still increased its total coal-related revenue by 5% from 2022 to 2023. Alliance isn’t going anywhere and provides a fantastic dividend yield.

Cal-Maine Foods (CALM)

A carton of eggs is placed on top a burlap bag. One egg is cracked open. Why is the cost of eggs rising?
Source: Poravute Siriphiroon /

Next on the list of high dividend coverage stocks is Cal-Maine Foods (NASDAQ:CALM), a firm in the consumer staples sector. The company is the largest producer and distributor of eggs in the United States. The firm’s operations include everything from breeding chickens, hatching chicks, growing and maintaining the animals, and producing, packaging, and distributing the eggs.

The company also pays a hefty amount of income, with an indicated dividend yield of 8.5%. This comes in massively above the average dividend yield for the consumer staples sector of 1.9%. It has the highest dividend coverage of all these stocks, with a ratio of 181%. The firm performed incredibly well in 2008, rising 8.2%. It has also had solid returns over the last five years, with shares rising 46% cumulatively.

Eggs are one of the most basic foods in the American diet, with the average person consuming 281 eggs per year. They are also one of the cheapest foods you can buy, despite prices remaining very elevated compared to pre-pandemic levels. Eggs are another product that’s not going away and should be safe from recession.

Avista (AVA)

Image of a gas burner with a blue flame
Source: Shutterstock

Last on the list of high dividend coverage stocks is Avista (NYSE:AVA), an electric and natural gas utilities company. The firm provides electricity and natural gas distribution in Washington State, Oregon, Idaho, Montana, and Alaska. The company has an indicated dividend yield of 5.5%, which is considerably higher than the average dividend yield for the utilities sector of 3.8%. The firm also has some ability to raise its dividend in the future, with a dividend coverage ratio of 133%.

The company fared well in 2008, only dropping 10% in the year. The company’s shares have not performed well over the last five years, however, down 22% cumulatively. Data from Koyfin shows shares have a 16% implied upside from current levels based on the average analysts’ forecast.

Not only does Avista have a high dividend and good historical performance in a recession, but it also may offer some moderate price appreciation.

On the date of publication, Leo Miller did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.

Leo Miller has been studying financial markets since his junior year of college. While he loves learning about investments to fuel his intellectual curiosity, he is particularly fond of helping others grow their understanding of complex financial topics. His areas of expertise include public equity and investment fund analysis. He has work experience investing in public and private markets, impact investments, and performing macroeconomic research.

Article printed from InvestorPlace Media,

©2024 InvestorPlace Media, LLC