Although the overall stock market has performed reasonably well this year, concerns about an economic recession continue to linger. Macroeconomic issues persist, and inflationary pressures are rising. For investors worried that the economy will eventually succumb to these headwinds and fall into a recession, buying shares of companies that perform well even in the most challenging environments is a wise move. The following three stocks are worth watching: Abbott Laboratories (ABT), Coca-Cola (KO), and Walmart (WMT).
Abbott is a quality stock to buy before a recession for several reasons. First, the company has a vast healthcare product portfolio encompassing four major categories: pharmaceuticals, medical devices, nutrition, and diagnostics. Many of these products remain in high demand regardless of the economic situation. For example, in the nutrition segment, the company is a market leader in infant formula—parents will not stop buying such products no matter the economic climate. In its core medical device business, Abbott sells a range of products used to treat serious or even life-threatening diseases, which also see resilient demand during recessions.
Second, the company has multiple long-term growth drivers. Its FreeStyle Libre series of continuous glucose monitoring devices has been a major growth driver and still has ample room for development. Through a recent acquisition, Abbott has also strengthened its position in the cancer screening market, another promising field.
Third, Abbott is an excellent dividend stock. This healthcare giant has increased its dividend payout for 54 consecutive years, making it a member of the “Dividend King” group (companies that have raised dividends for at least 50 consecutive years). When a recession drags down the overall stock market, regular dividend payments help buffer market losses. The stock has underperformed this year, partly due to slowing revenue growth, particularly in its diagnostics and nutrition businesses. However, recent developments, including an acquisition that has bolstered its diagnostics segment, should help address these issues. The stock should remain a reliable dividend payer through the next recession and beyond.
Coca-Cola is a consumer goods giant with a vast beverage portfolio encompassing water, alcoholic beverages, sports drinks, coffee, tea, and nearly everything in between. The company possesses strong brand power, enabling it to secure shelf space in grocery stores while easily attracting customers. The consumer goods sector is highly defensive. Therefore, Coca-Cola’s business should perform relatively well even during recessionary periods, a fact the company has demonstrated many times before.
Coca-Cola is also an innovative beverage manufacturer, regularly launching new products or improving existing ones to stay ahead of changing consumer demands. For example, this can mean introducing cheaper versions of certain well-known brands during tough economic times to appeal to price-sensitive consumers. All these factors make Coca-Cola a recession-resistant stock. Most importantly, the company is also a “Dividend King,” having increased its dividend payout for 64 consecutive years.
Walmart is a leading retailer in the United States, renowned for its “Everyday Low Prices” strategy. Leveraging its massive scale and broad customer base, the company can negotiate favorable deals with suppliers and pass the savings on to customers, whether they shop in physical stores or online. Walmart is a leading e-commerce retailer, and its online retail business has grown rapidly in recent years.
Furthermore, Walmart has an extensive physical footprint across the U.S.: 90% of the nation’s population lives within 10 miles of a Walmart store. In other words, Walmart’s convenient locations and attractive prices make it an excellent place to shop, especially during a recession. This is why the company tends to perform relatively well even during periods of frequent economic troubles. Finally, Walmart is also a “Dividend King,” having increased its dividend payout for 53 consecutive years. If the economy falls into a recession, this retail giant may experience some impact, but it should be able to weather the storm and continue performing well over the long term.
In summary, Abbott Laboratories, Coca-Cola, and Walmart operate in the healthcare, consumer goods, and retail sectors respectively, all of which possess relatively strong counter-cyclical attributes. Regardless of whether the economy falls into a recession, demand for their products and services remains relatively stable. Additionally, all three companies are “Dividend Kings,” with long track records of consistently increasing dividend payouts, providing investors with stable cash returns and a degree of defensive protection during market volatility. For investors concerned about the economic outlook, these three stocks are worth adding to their watchlists.
