Do you remember 2008? Wall Street is going crazy, we find out we're in the midst of a recession, and the Federal Reserve is forced to lower interest rates to practically zero and pump money into the economy alongside fiscal stimulus to avoid total economic doomsday.

Nearly every pundit frets that zero percent interest and all that money printing would be hugely inflationary. Many announce that the Fed's "panic actions" would cause "Zimbabwe-style hyperinflation." Peter Schiff -- by no means alone but among the most prominent of inflation-panic-mongers -- exclaims:

[The U.S. Dollar] is on the verge of collapse. People who don't get out [of it] are going to be completely broke. That is obvious to me that that's what's going to happen.... This is hyperinflation, this is Zimbabwe, this is the identical monetary policy that the Weimar Republic did, and we're gonna have the same result.

Take a deep breath. Three years later, none of that has happened. In fact, the opposite is happening. And that unusual fact can have enormous implications for your investments. Here's what's going on and five stocks to help keep your portfolio safe in this bizarre environment.

What's going on
Despite volatile prices in some high-profile commodities, inflation has been relatively tame. The red line below is the "core" inflation rate that excludes food and energy. The blue line includes them:

Graph

So why haven't we seen a lot of inflation? Part of it is because the huge decline in housing prices pushes down consumer price averages. A lot of it also has to do with the fact that money isn't being spent. The Fed could print a gazillion dollars, but if it got buried it in the ground, no one would notice.

Households, banks, and businesses are basically burying their cash today. Here's the rate at which money is turning over in the economy:

Graph

In the aftermath of a massive credit bubble, households and businesses are hoarding cash and repaying debt rather than spending. That's what's holding back the recovery. It's also a hugely deflationary force that ordinary inflationary measures -- such as low interest rates and a juiced money supply -- have to contend with just to keep the economy from sinking into a Great Depression-like morass.

Who cares?
A slow-growth, low-inflation economy can affect your portfolio in different ways. But here are four characteristics that are shared by companies built for safety in these shaky times:

  • Defensive industries: Companies that sell necessities tend to have more stable sales when customers are cutting back.
  • Low debt burden: Low inflation is great for creditors but painful for debtors because their debt is more expensive than it would be otherwise. I've written columns in the past explaining why specific creditors like Annaly Capital (NYSE: NLY) and Chimera (NYSE: CIM) make sense. Today, we'll consider the other side of the coin -- companies with limited debt or access to cheap credit.
  • Increasing sales: It's a good sign if a company is able to increase sales despite a slow economy.
  • Healthy dividends: Periods of low inflation and low interest rates leave many investors scrambling for income, which makes dividends more attractive. In fact, interest rates are so low right now that the S&P 500 actually yields as much as 10-year U.S. Treasury bonds.

Only a handful of companies meet these criteria. Here are five of the strongest:

Company

Industry

Interest / Operating Income

1-Year Revenue Growth

Dividend Yield

Sysco (NYSE: SYY) Food distribution 6% 6% 4.0%
Johnson & Johnson (NYSE: JNJ) Medical devices 3% 1% 3.6%
Kimberly-Clark (NYSE: KMB) Personal products 10% 4% 4.0%
AT&T (NYSE: T) Diversified telecommunications 16% 2% 6.0%
PepsiCo (NYSE: PEP) Soft drinks and snack food 10% 29% 3.3%

Source: Capital IQ, a division of Standard & Poor's.

Sysco is the undisputed king of food distribution -- a necessity if there ever was one. Health-care spending isn't something people choose to skimp on, and Johnson & Johnson doesn't have the same upcoming patent problems as many of the top pharmas. Kimberly-Clark sells a diversified batch of low-priced personal care products. AT&T operates in a rather steady, profitable, and consolidated industry. PepsiCo is a duopolist that enjoys huge, reliable margins selling sugar water at a large markup.

Each of these names operates in a defensive industry, has a relatively low interest burden on its debt, enjoys increasing sales, and pays a meaningful dividend. They're the sort of names income-seeking investors may want to consider in this shaky economy.

If you're looking for additional help finding outstanding dividend payers, check out The Motley Fool's special report "13 High-Yielding Stocks to Buy Today." You can download all of the research for free by clicking here.