3 Stocks (and 1 ETF) to "Default-Proof" Your Portfoliohttp://www.fool.com/investing/general/2013/10/18/read-this-awesome-article.aspx John Bromels
October 18, 2013
First off, let me say that I don't believe the United States will default on its debt. But I also didn't believe that the government shutdown or sequestration would happen, and I was wrong both times. Certainly, anything seems possible in today's political climate.
So if there is a default, where's a safe place for your money?
The answer: not US treasury bonds. Those are the very obligations we'd be defaulting on! And according to a 2011 Kiplinger report, other traditionally "safe" savings vehicles are anything but default-proof. "Even money market funds could be at risk because they're loaded with short-term Treasury and government-agency IOUs," the report concludes.
So if you can't hide your money in bonds or money market accounts, the space under your mattress may look pretty tempting. But don't worry, here are three stocks (and one ETF) with good chances of weathering a potential default.
One such company is Colgate-Palmolive (NYSE: CL), which currently sports a 2.21% dividend of $1.36 per share, and has been increasing that dividend for 50 years. I chose them over their fellow consumer goods Dividend Aristocrat Procter & Gamble (NYSE: PG) because Colgate-Palmolive's brands' prices generally compare favorably to its competitors'. P&G's many premium brands (with their premium prices to match) like Tide and Charmin might be at risk during a recession. Colgate-Palmolive, on the other hand, weathered the Great Recession comparatively well:
Go big or go home
Another Dividend Aristocrat that did exceptionally well during the Great Recession is McDonalds (NYSE: MCD), which declined just 20% from top to bottom (compared to the overall market's decline of 55%). Although its stock price has been on a downward trend for the last several months, the "premium" (but still cheap) menu items at McDonald's like Mighty Wings and McWraps may seem pretty appealing to cash-strapped families. Plus, it sports a 3.42% dividend yield.
One big advantage to both of these companies is that they're, well, big. Because they aren't growing quickly, they are unlikely to need to take on a lot of debt. If the US defaults, interest rates are almost certain to rise, meaning that in a default scenario, bigger may very well be better.
There's gold in them thar defaults