People seeking income investments that can reliably withstand economic downturns have a dilemma. Fixed-income instruments like Treasuries have meager payouts at the moment, and dividend stocks come with the risks attached to their businesses. But stocks whose yields are high relative to those of fixed-income assets, and which offer the possibility of payouts that could increase much faster than inflation, can be attractive as the cornerstones of an income-oriented portfolio.

To mitigate the business risks that every company faces, start by taking a long-term perspective that will allow you to pay less heed to short-term share price oscillations. Then, choose companies that have a high likelihood of maintaining or growing their payouts right through the next recession, and have a reasonable potential to deliver stock price gains as well.

Two companies that fit the criteria for this approach are Hasbro (HAS 1.09%) and Crown Castle International (CCI -1.09%). Hasbro has a depressed stock price, and therefore a higher-than-usual yield, because of some factors that should prove to be temporary, and has strong enough cash generation to weather downturns. Crown Castle has a predictable and growing business that's recession-resistant.

Piles of coins and upward graphs.

Image source: Getty Images.


The market hammered Hasbro on Oct. 22 after the company delivered a third-quarter report that badly missed analysts' consensus expectations on both the top and bottom lines. But the reasons for that stumble were largely factors out of the company's control, and issues that will eventually be resolved. Long-term investors have an opportunity now to pick up shares with a decent yield, as well as the potential for capital gains when those issues fade in the rear-view mirror.

President Trump's trade war has taken all the fun out of owning Hasbro stock lately. Most Hasbro products destined for sale in the U.S. are made in China, and when the Trump administration announced the List 4 tariffs that would levy a 25% tax on Hasbro's products starting in September, retailers responded in July and August by canceling a lot of orders for the holiday season, taking a big bite out of the toymaker's third-quarter results. The implementation date for the tariffs was subsequently shifted to December, but the damage had already been done.

Hasbro logo.

Image source: Hasbro.

Hasbro is working to shift its production from China to India and Vietnam, but that will take time, and Q4 will be challenging whether or not the new tariffs actually go into effect this year. The political headwinds hit just as the company was recovering from the impact of the shutdown of Toys R Us, which was the main reason the stock plummeted 28% late last year.

But as it did in that situation, Hasbro will adapt, and the trade war itself will likely be resolved eventually. The company has a portfolio of strong brands, from classic toys and games like Monopoly, Nerf, and Play-Doh, to newer sources of growth such as Magic: The Gathering and recently acquired Power Rangers. Hasbro is Disney's licensee for the toys connected to franchises such as Marvel, Star Wars, and Frozen, and that valuable partnership is a major reason why its partner brand revenue grew 40% in the latest quarter.

Despite its recent setbacks, the things that make Hasbro a great dividend stock to buy now are the safety of its payout and its growth. The company has $1.1 billion of cash on its balance sheet and dividend payments amount to only 64% of operating cash flow. Hasbro raised its dividend 7% this year and over 10% last year, and was able to maintain it during the Great Recession. The stock currently yields 2.8%, toward the high end of its historic yield, and holds the strong possibility of share price gains once the trade issues hobbling it blow over.

Crown Castle International

For a dependable and growing dividend with some protection from economic downturns, consider Crown Castle. This stock doesn't have a history of a lot of sharp ups and downs -- rather, it has delivered fairly steady growth from recurring revenue in an industry with significant tailwinds.

Crown Castle is a real estate investment trust (REIT) that owns communication infrastructure -- 40,000 cell towers, 75,000 miles of fiber optic cable, and 65,000 small cell networks deployed or under construction -- and leases space and capacity to tenants such as the four largest U.S. wireless providers. What makes its revenue so stable is that its customers are locked into long-term contracts with escalation clauses that raise rents over the lives of the leases. Crown has leases on the books amounting to $24 billion, more than four times its expected 2019 revenue, with an average remaining lease term of five years.

Cellular antenna against the backdrop of a city.

Cellular antenna site in an urban setting. Image source: Getty Images.

The company's steady cash flow and ability to invest in growing its infrastructure assets have allowed it to construct a remarkable track record of revenue growth, even during the recession years of 2008 and 2009. But the future looks even more promising. Wireless users' unquenchable thirst for data bandwidth is driving cellular providers to increase the amount of space they rent on the company's towers for more equipment. Meanwhile, the rollout of 5G is driving the need for small cells and fiber links, which the company is well-positioned to exploit. The number of small cells deployed in the U.S. is expected to grow tenfold during the next seven years, and Crown Castle has the leading position among infrastructure providers in the small cell market.

Crown Castle expects to grow adjusted funds from operations per share (the favored measure of performance for REITs) by 8% this year, and thinks it will continue to hit its target of 7% to 8% annual dividend growth well into the future. After a recent 7% increase to the payout, this dividend stock yields a healthy 3.4%.