6 Recession-Resistant Stocks That Can Survive Stagflation


  • Recession-resistant stocks can survive stagflation mainly due to their low valuations, dividends and earnings growth.
  • MDC Holdings (MDC): This homebuilder and mortgage originator produces enough earnings to cover its dividend.
  • Hasbro (HAS): This toy company is projected to show higher revenue and earnings this year and next.
  • TotalEnergies (TTE): This oil and gas integrated producer has a 5.38% dividend yield, a low 4.5x forward earnings multiple and an additional 3% buyback yield.
  • Verizon (VZ): Verizon is attractive in that its P/E multiple at 9.3x is well below its five-year average of 11.36x and its 4.96% dividend yield is well over its 4.47% historical average.
  • Crescent Capital BDC (CCAP): This business development company has a dividend yield of 10.45% and pays both regular and special dividends.
  • Omega Healthcare Investors (OHI): This REIT invests primarily in skilled nursing and assisted living facilities, which is a growing area given the aging U.S. population.
Recession-Resistant Stocks - 6 Recession-Resistant Stocks That Can Survive Stagflation

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Recession-resistant stocks have the ability to outperform and survive better than other stocks during a period of stagflation. That is when inflation is high, employment is low and economic growth is either negative or faltering.

This is what happened during much of the 1970s. This was when government policies were hostile to businesses and economic growth. Policy solutions tended to gravitate toward high taxes, bureaucratic interference and top-down solutions, rather than laissez-faire prescriptions. As a result, stocks faltered during much of that decade. It ended in a period of super high inflation that could only be broken by a very tight monetary policy.

As things stand now, many of these lessons may end up having to be relearned. One way to avoid these pitfalls from an investment standpoint is to stick with strictly value-oriented stocks. That means stocks that pay dividends, have higher than average yields, good earnings outlooks and low price-to-earnings multiples.

Let’s dive in and look at these recession-resistant stocks to buy.

Ticker Company Current Price
MDC MDC Holdings $34.94
HAS Hasbro $82.17
TTE TotalEnergies $51.15
VZ Verizon $51.42
CCAP Crescent Capital BDC $15.70
OHI Omega Healthcare Investors $28.86

Recession-Resistant Stocks: MDC Holdings (MDC)

MDC Holdings (NYSE:MDC) is a home building and financial services company with operations in 14 fast-growing population states, under the Richmond American Homes brand name. Its financial services operations comprise originating mortgage loans primarily for homebuyers.

Right now the stock is very cheap. For example, according to Seeking Alpha data, analysts project earnings this year of $10.46 per share and $10.18 for next year. So, at $34.94, as of July 5, it trades for just 3.3x this year’s earnings and 3.4x next year’s earnings.

If that was not enough, the company pays a 50-cent quarterly dividend, which gives it an annual yield of 5.72% (i.e., $2/$34.94). That yield alone will make it one of the top recession-resistant stocks.

Even though home buying interest has slackened and rates have risen, analysts expect that revenue will remain strong. In fact, its gross margins rose last quarter to a very strong level. Moreover, the company has plenty of cash, $582 million, to withstand any kind of major downturn.

Hasbro (HAS)

Hasbro (NASDAQ:HAS) is a brand-name toy maker. People will buy toys, recession or not. In fact, sales are now forecast to rise by 4.8% to $6.96 billion in 2023. Moreover, earnings are seen as moving up 12.1% to $5.86 per share in 2023. This puts HAS stock on a cheap forward price-to-earnings multiple of just 14x for 2023.

Moreover, Hasbro pays an annual dividend of $2.80, based on a quarterly rate of 70 cents, which was recently raised from 68 cents. That gives HAS stock a 3.41% dividend yield based on its price on July 5, of $82.17.

In fact, its average yield over the past four years was 2.92%, according to Seeking Alpha. That means that if HAS stock were to reach the average 2.92% yield, it would go up by 17% to $95.89. Moreover, Hasbro has been buying back shares. This helps increase the dividend-per-share if the dividend cost is kept at the same level.

The bottom line here is that people will ultimately buy Hasbro toys for Christmas, which makes it one of the better recession-resistant stocks.

TotalEnergies (TTE)

TotalEnergies SE (NYSE:TTE) is a French integrated oil and gas company. It has good earnings growth, strong free cash flow (FCF) and a low valuation, along with a powerful buyback program.

For example, earnings are forecast to reach $12.50 this year, putting TTE stock on a forward multiple of just 4.1x earnings. Even though analysts project lower earnings for 2023, it is still cheap at a 4.5x P/E ratio.

In addition, TotalEnergies is committed to raising its dividend by 5% annually and now has a yield of 5.38%, assuming the quarterly dividend remains at approximately 68.83 cents per quarter.

On top of this, the company has indicated it will buy back $2 billion of its stock during the first half, putting it on a $4 billion run rate. That represents 3% of its $133.56 billion market value.

So investors receive a total yield, including the 5.38% dividend yield and 4% buyback yield, of 8.38%. That makes it one of the best recession-resistant stocks on this list.

Verizon (VZ)

Verizon (NYSE:VZ) is one of the largest telecom operators in the U.S. It is forecast to produce a 3% earnings growth to $5.54 per share for the year ending 2023. At $51.42 on July 5, the stock is on a forward multiple of just 9.3x for 2023.

This is significantly below its five-year forward P/E average of 11.36x based on Morningstar’s valuation page. That shows that the stock is still very cheap.

Moreover, Verizon pays a quarterly 64-cent dividend. That works out to an annual dividend payment of $2.56 per share. That gives the stock a dividend yield of 4.98%.

The quarterly dividend is likely to be raised in early September when Verizon is scheduled to next declare its dividend. This is because the dividend has risen every four quarters over the past 18 years. So, the yield going forward is likely over 5%.

Morningstar reports that its average dividend yield over the past five years has been 4.47%. That implies the stock could rise to $57.27 (i.e., $2.56/0.0447). That represents a gain of 11% from here.

Crescent Capital BDC (CCAP)

Crescent Capital (NASDAQ:CCAP) is a $482 million market cap business development company (BDC). It invests its capital solely in the debt of middle-market companies in the U.S in the secondary market. Its present dividend rate is $1.64 annually, based on a “regular dividend” of 41 cents quarterly rate. That puts it on an annual yield of 10.7% at $15.70 as of July 5.

Crescent also started paying a 5-cent special dividend in the past three quarters. That brings the annual dividend to $1.84 annually, if it continues, or a yield of 11.7%.

However, it is too late to get a special dividend, since the ex-dividend date for the last one already declared is past. It is not yet clear if the company will renew a new round of special cash dividends.

It’s best to not count on the extra 5 cents continuing if the U.S. is in a deep recession. Many of its borrowers will begin defaulting on their debt obligations. That will make it harder for Crescent Capital to keep up the extra payments.

So investors should just expect $1.64 in dividends annually for now — and a 10.45% yield,  This still makes it one of the best recession-resistant stocks going forward.

Omega Healthcare Investors (OHI)

Omega Healthcare Investors (NYSE:OHI) is a real estate investment trust (REIT) run by the large Omega private equity firm that is focused on investing in facilities run by skilled nursing and assisted living operators. It pays a quarterly dividend of 67 cents, or $2.68 annually. At the closing price on July 5 of $28.86, the stock has a yield of 9.23%.

In addition, its tangible book value is $13.71. So the stock’s price-to-TBV is over 2.1x. That means the market is willing to value this stock as a valuable operating company rather than a mutual fund or regulated investment company like BDCs.

This is important since OHI has started buying back its shares. Last quarter it bought back $27 million of its shares. Although that is not much, it still lowers the shares outstanding. This will allow OHI to incrementally raise its dividends on a per-share basis in the future.

On the date of publication, Mark Hake 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 InvestorPlace.com Publishing Guidelines.

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