In this article, we discuss 10 high dividend stocks to shore up your cash position before recession begins. You can skip our detailed discussion on analysts’ views about the recession, and go directly to read 5 High Dividend Stocks to Shore Up Your Cash Position Before Recession Begins.
The Federal Reserve raised interest rates second time this year by 0.75 percentage points and expects another 1.5 percentage points hike as the economy enters the highest inflation levels since the early 1980s. In wake of this current situation, Deutsche Bank said that there is a 50% likelihood of a global recession in 2023. The bank further mentioned that the war in Ukraine has resulted in a surge in global fuel prices which had serious implications for the global economy.
As the global economy contracted in the first two quarters of this year, the International Monetary Fund slashed its global growth projections for 2022 and 2023. The bank expects the world economy to surge by 3.2% this year, downgrading its April projections of 3.6%. With the persistent inflation, the majority of US citizens are feeling insecure about their emergency savings. According to a survey conducted by Bankrate.com, 58% of the Americans surveyed do not have secure emergency savings, up from 42% in 2021. In addition to this, 23% of the candidates do not have emergency savings at all.
Importance of Cash During Recession
The threats of a possible recession have brought forward the importance of liquid assets like cash to cover major expenses. Christopher Lyman, an analyst at Allied Financial Advisors, mentioned that it is imperative to save at least three months’ worth of living expenses during a recession and to focus on other streams of income as recessions always come with higher unemployment. This was also supported by Rob Williams, managing director of financial planning at Charles Schwab, who asserted that having cash set aside is recommended during a recessionary period which gives time for your volatile investments to recover.
In this current economic turmoil, investors are favoring dividend stocks as they provide a hedge against inflation. Companies with reliable and high payouts usually grab the spotlight during uncertain economic periods. Some of the prominent dividend stocks in this aspect are The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and Walmart Inc. (NYSE:WMT). In this article, we will discuss some more high dividend stocks to buy before the recession.
Photo by Karolina Grabowska: https://www.pexels.com/photo/hands-holding-us-dollar-bills-4968630/
Our Methodology
For this list, we selected dividend stocks that have yields above 3% and have strong dividend histories.
High Dividend Stocks to Shore Up Your Cash Position Before Recession Begins
10. Broadcom Inc. (NASDAQ:AVGO)
Dividend Yield as of August 4: 3.01%
Broadcom Inc. (NASDAQ:AVGO) is a California-based semiconductor manufacturing company that designs and supplies a wide range of semiconductors and infrastructure software products.
In Q1 2022, Broadcom Inc. (NASDAQ:AVGO) generated over $4.15 billion in free cash flow, up from $3.38 billion in the previous quarter. The company’s operating cash flow came in at $4.2 billion, compared with $3.48 billion in the previous quarter. Dividend payments during the quarter amounted to $1.7 billion, which shows that the company’s free cash flow was enough for its shareholder returns. Broadcom Inc. (NASDAQ:AVGO) has an 11-year track record of consistent dividend growth. It pays a quarterly dividend of $4.10 per share, with a yield of 3.01%, as of August 4.
In July, Deutsche Bank set a $635 price target on Broadcom Inc. (NASDAQ:AVGO) with a Buy rating on the shares, highlighting the company’s position to survive the possible supply chain issues.
Broadcom Inc. (NASDAQ:AVGO) was a popular buy among elite funds in Q1 2022, as 71 hedge funds in Insider Monkey’s database owned stakes in the company, up from 62 in the previous quarter. The collective value of these stakes is roughly $5.5 billion.
In addition to dividend stocks like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and Walmart Inc. (NYSE:WMT), investors are also eyeing Broadcom Inc. (NASDAQ:AVGO) for their recession portfolios.
ClearBridge Investments mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q4 2021 investor letter. Here is what the firm has to say:
“However, ClearBridge portfolio companies are responding by supporting their workforces and showing resilience in adapting and thriving. Semiconductor companies ClearBridge owns and engages with have been successful in advancing vaccinations in their global supply chains. In Malaysia, for example, Broadcom has taken part in PIKAS, a public-private partnership vaccination program focusing on the workforce in critical manufacturing sectors. By the summer of 2021 Broadcom was able to get over 90% of workers in its Penang factory at least one dose of vaccine, and roughly 73% fully vaccinated. Companies in the program also pay the administration cost for vaccinations including cases where the employee is no longer employed by the company before full immunization of the employee.”
9. Advance Auto Parts, Inc. (NYSE:AAP)
Dividend Yield as of August 4: 3.07%
Advance Auto Parts, Inc. (NYSE:AAP) is an American retail company that provides automotive aftermarket parts. The company also offers related services to its consumers.
In FY21, Advance Auto Parts, Inc. (NYSE:AAP) reported an operating cash flow of over $1.1 billion, up from $969 million in 2020. The company’s free cash flow also jumped to $822.6 million during the year, from $701.8 million in the last year. During Q1 2022, the company returned over $400 million to shareholders in dividends and share repurchases. Advance Auto Parts, Inc. (NYSE:AAP) has been making dividend payments for over a decade and maintains a 3-year streak of dividend growth. It pays a quarterly dividend of $1.50 per share, with a yield of 3.07%, as of August 4.
In June, MKM Partners initiated its coverage of Advance Auto Parts, Inc. (NYSE:AAP) with a Buy rating and a $196 price target, highlighting the higher fuel prices.
At the end of Q1 2022, 29 hedge funds in Insider Monkey’s database owned stakes in Advance Auto Parts, Inc. (NYSE:AAP), down from 36 a quarter earlier. These stakes are collectively valued at over $695 million. Among these hedge funds, Millennium Management was the company’s largest stakeholder in Q1.
ClearBridge Investments mentioned Advance Auto Parts, Inc. (NYSE:AAP) in its Q4 2021 investor letter. Here is what the firm has to say:
“Several encouraging macro trends are emerging in support of two areas outside tech: consumer spending and industrial production. Unlike in past recessions and recoveries, consumer balance sheets have actually improved dramatically since the onset of the pandemic. We expect the supply chain constraints contributing to inflation and goods shortages will begin to lessen with an ambitious rebuilding of inventories. This should be a multi-year phenomenon beneficial to quality industrials with high levels of organic growth like distributors such as Advance Auto Parts.”
8. T. Rowe Price Group, Inc. (NASDAQ:TROW)
Dividend Yield as of August 4: 3.79%
T. Rowe Price Group, Inc. (NASDAQ:TROW) is a Maryland-based investment management company that offers advisory services to institutions and individuals. On August 1, the company declared a quarterly dividend of $1.20 per share, in line with its previous dividend. The company holds a 36-year track record of consistent dividend growth. On August 4, the stock had a dividend yield of 3.79%.
In Q2 2022, T. Rowe Price Group, Inc. (NASDAQ:TROW) reported an operating cash flow of $623.6 million while its free cash flow stood at $555.7 million. The company paid $476.6 million in dividends during the quarter, which takes its payout ratio to 43.9%.
As per Insider Monkey’s Q1 2022 database, 33 hedge funds owned stakes in T. Rowe Price Group, Inc. (NASDAQ:TROW), with a total value of over $457 million. In comparison, 30 hedge funds owned stakes in the financial management company in the previous quarter, worth $474 million.
7. Edison International (NYSE:EIX)
Dividend Yield as of August 4: 4.04%
Edison International (NYSE:EIX) is a California-based public utility company that generates and distributes electric power and also specializes in renewable energy.
Edison International (NYSE:EIX) showed solid financials in its Q2 2022 earnings reporting. The company’s operating cash flow stood at $446 million and had over $122 million in cash and cash equivalents at the end of the quarter. The company’s total assets came in at over $75 billion, up from $74.7 billion at the end of December 2021. In the first half of the year, Edison International (NYSE:EIX) paid $524 million in dividends, up from $494 million in December. Edison International (NYSE:EIX) has been raising its dividend consistently for the past 18 years. The company offers a quarterly payout of $0.70 per share, with a yield of 4.04%, as of August 4.
In July, Barclays gave an Equal Weight rating to Edison International (NYSE:EIX) as the firm updated its price targets for the North American power and utility sector.
According to Insider Monkey’s Q1 2022 data, 22 hedge funds owned investments in Edison International (NYSE:EIX), down from 25 in the previous quarter. These investments are collectively valued at over $1.36 billion. With stakes worth over $1 billion, Pzena Investment Management was the company’s largest stakeholder in Q1.
ClearBridge Investments mentioned Edison International (NYSE:EIX) in its Q4 2021 investor letter. Here is what the firm has to say:
“Defensive sectors such as utilities underperformed the broader market, with our California-based utilities, Edison International, generating modestly below-sector returns on continuing wildfire concerns, despite significantly improved financial exposure due to the 2019 legislation AB 1054. The legislation was a major positive step toward reducing wildfire risk to California public utilities, which we expect to be reflected in improved valuations over time.”
6. National Retail Properties, Inc. (NYSE:NNN)
Dividend Yield as of August 4: 4.67%
An American real estate investment trust, National Retail Properties, Inc. (NYSE:NNN) reported nearly $3.3 million in cash and cash equivalents at the end of Q2 2022, with its total assets amounting to over $7.8 billion. The company’s free cash flow for FY21 stood at $568.4 million, up from $450 million in the last year.
On July 15, National Retail Properties, Inc. (NYSE:NNN) announced a 3.8% hike in its quarterly dividend to $0.55 per share. This was the company’s 33rd consecutive year of dividend growth. As of August 4, the stock’s yield came in at 4.67%.
Appreciating the company’s Q2 earnings beat, Stifel raised its price target on National Retail Properties, Inc. (NYSE:NNN) to $54 in August and kept a Buy rating on the shares. Analysts are also positive about other dividend stocks like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and Walmart Inc. (NYSE:WMT).
At the end of Q1 2022, 18 hedge funds in Insider Monkey’s database owned stakes in National Retail Properties, Inc. (NYSE:NNN), up from 16 in the previous quarter. These stakes hold a combined value of over $92.5 million. Millennium Management held the largest stake in the company in Q1, worth over $19.4 million.
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Disclosure. None. 10 High Dividend Stocks to Shore Up Your Cash Position Before Recession Begins is originally published on Insider Monkey.