The recession alarm bells are ringing loudly, and many are getting an eerie sense of déjà vu from 2007. Back then, the economic indicators suddenly turned blood red, catching many off guard despite the seemingly solid market fundamentals and macroeconomic landscape. It’s hard to shake the feeling that we could see a similar downturn, though no one can really predict the future with certainty.
I believe it’s prudent to pivot towards more stable and profitable investments in times like these. Warren Buffett has been making such moves recently, and I think we should take a page out of his playbook. I’m not suggesting a complete exodus from the market; that would be an overreaction. Instead, I recommend building a balanced portfolio with a mix of treasury bonds and carefully selected dividend stocks.
There are some incredibly stable dividend stocks out there offering solid yields in the high single digits. These cash cows are becoming increasingly attractive in the current environment due to their profitability, and they’ll look even more appealing as interest rates inevitably come down. Here are seven to look into:
Western Midstream Partners (WES)
Western Midstream Partners (NYSE:WES) is a midstream energy company that operates pipelines and processing facilities. The company has been delivering strong financial results lately, with Q1 2024 earnings per share of $1.47, beating estimates by 68 cents, and revenue growing 20.9% year-over-year to $887.73 million, also beating expectations. Western Midstream Partners is probably one of the most stable companies you can buy in the current environment. It is far removed from the tech selloffs, and the stock is unlikely to see sudden crashes due to the business model.
Midstream companies like Western Midstream are little affected by the price wobbles in the energy sector since they operate the pipelines and have little to do with energy prices. Of course, demand could be hurt, but that is unlikely to be too significant to cause Western Midstream a major problem.
This company is a cash machine, generating record free cash flow of $225 million in the first quarter, and currently yields a hefty 9.3% dividend after a 52% increase to the payout.
Allianz (ALIZY)
Allianz SE (OTCMKTS:ALIZY) is a global insurance and asset management powerhouse based in Germany. The company has weathered recent challenges well, with its stock price recovering strongly from the 2022 market downturn and now trading $5 higher than pre-pandemic levels.
In the first quarter, Allianz delivered impressive results, with operating profit growing 6.8% to 4 billion euros and net income rising 16%. Analysts are bullish, with the consensus rating being a “strong buy.“
However, some risks remain. Allianz is still working through real estate revaluations, booking another 2% markdown in the quarter after an 8% hit in 2023. But management seems to be navigating this well.
Allianz’s 5.6% dividend yield looks attractive and well-covered by earnings. The company has a strong track record of growing payouts. If you’re looking for a high-quality, cash-gushing dividend stock, Allianz is a compelling pick to ride out any further volatility.
HSBC Holdings (HSBC)
HSBC Holdings (NYSE:HSBC) is a multinational banking and financial services giant based in London. The company weathered its fair share of challenges and controversies in recent years, but its stock price has stabilized substantially, and HSBC is now gushing cash.
In Q2 2024, HSBC beat market expectations, delivering strong profits and initiating a $3 billion share buyback program. The stock also boasts one of the highest dividend yields in the banking sector at 7.5% as of writing.
While financial firms are undoubtedly vulnerable to economic downturns, HSBC presents a compelling long-term investment opportunity. The bank’s robust margins provide a significant buffer against potential headwinds. That said, it’s worth noting that HSBC’s exposure to the troubled Hong Kong commercial real estate market has raised some concerns among investors. Analysts are still bullish, though.
If you’re seeking a cash-gushing dividend stock with a global footprint, HSBC is definitely worth considering for your portfolio.
Energy Transfer (ET)
Energy Transfer (NYSE:ET) is a midstream oil and gas company that transports, stores and processes natural gas, crude oil and natural gas liquids. The company has been performing well lately, with strong first-quarter results that beat revenue expectations and saw volumes increase across most segments.
I believe Energy Transfer is another solid midstream pick on this list. As I mentioned, these types of companies tend to be fairly insulated from the ups and downs of energy prices and can stabilize your portfolio. Sure, ET stock took some hits in 2020 when demand dried up and back in 2015 when the whole MLP space struggled, but it’s been a different story in recent years. I’m quite bullish on MLPs since 2022 as domestic production becomes increasingly vital.
Analysts seem to agree, with ET earning a “strong buy” consensus rating based on eight “buys” and one “hold” in the last three months. However, you should note that ET did miss Q1 EPS estimates by 7 cents.
Still, with a 8.3% dividend yield, I think ET is worth a look.
Deutsche Telekom (DTEGY)
Deutsche Telekom (OTCMKTS:DTEGY) is one of Europe’s largest telecommunications providers. The company has been delivering solid financial results, with Q1 2024 service revenue growing 4.1% organically and adjusted EBITDA increasing 6.9% year-over-year.
DTEGY is a reliable dividend payer that can keep rewarding shareholders even in challenging times. The stock has gained an impressive 26% over the past year and 62% in the last five, showing resilience amid Europe’s economic headwinds and tech sector volatility.
With a 3.1% dividend yield, you can sit back and collect steady income as DTEGY navigates the storm.
Analysts are largely bullish on the stock, but it’s worth noting that DTEGY has underperformed its industry regarding earnings surprises over the past year. Nevertheless, I think the company is still a cash-gushing dividend stock that’ll keep giving.
Axa SA (AXAHY)
AXA SA (OTCMKTS:AXAHY) provides insurance and asset management services to 93 million clients in 51 countries. The company has been making strategic moves lately, with the sale of AXA Investment Managers to BNP Paribas (OTCMKTS:BNPQY) for 5.4 billion euros and the acquisition of Nobis Group in Italy for 500 million euros to expand its P&C operations.
I think AXAHY stock looks quite attractive right now. It’s up 12% over the past year, even with a slight revenue miss in Q1. The life insurance business provides a stable foundation of sticky revenue that allows AXA to keep gushing cash.
Plus, you get a tasty 6.2% dividend yield to boot.
Analysts seem bullish too. JP Morgan recently reiterated its “buy” rating.
AXA is showing solid growth, with Q1 revenues up 6%. Price hikes have been a key driver, and asset management profits have gotten a boost from AuM inflows. With a robust balance sheet and undemanding valuation, I see AXAHY as a clear buy for dividend investors.
Canadian Imperial Bank of Commerce (CM)
Canadian Imperial Bank of Commerce (NYSE:CM) is one of the “Big Five” banks in Canada, providing a wide range of financial products and services to individuals, businesses, and institutions. The bank has been navigating the challenging economic environment relatively well, delivering solid results in its latest quarter.
CM has historically been one of the most stable companies out there. Sure, it’s seen its fair share of crashes during recessions, but that’s normal for any banking company due to losing confidence. However, I believe this is a solid long-term bet. Canadian banks also have a reputation for being quite safe and stable during downturns.
I’m still optimistic about CM. For instance, there is sequential improvement in impaired PCLs in CM’s Canadian personal and business banking segment, which goes against the industry trend. That said, some analysts expect provisions for credit losses to remain elevated in the near term due to the uncertain macro environment.
CM stock typically trades between 40 and 50 CAD, and I expect that range to hold. Any dips below would present a good buying opportunity in my view.
Plus, the stock offers a 5.4% dividend yield.
On the date of publication, Omor Ibne Ehsan 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.