Several U.S. stock exchanges became the latest victims of the COVID-19 coronavirus outbreak this week. The Dow Jones Industrial Average, the S&P 500, and the NASDAQ all officially entered correction territory on Thursday morning, each down more than 10% in recent days as concerns about the spread of the disease took center stage. A patient in California contracted the virus without traveling to an infected area or having contact with someone known to have the disease, raising new fears the virus could begin to spread in the U.S. Some fear that concerns about the virus could ultimately drive the U.S. economy into recession.

While it can be unnerving for investors to see their portfolios awash in red ink, it's important to remember that these same conditions create compelling opportunities and set the stage for impressive recoveries once the outbreak has run its course.

With that in mind, let's look at three companies that will likely still do well even if conditions continue to deteriorate: McDonald's (NYSE:MCD), Walmart (NYSE:WMT), and Hasbro (NASDAQ:HAS).

Downward trend arrow with stock ticker board in background

Image source: Getty Images.

1. McDonald's: Gourmet returns

Even a stalwart stock like McDonald's hasn't been immune to the recent downturn, dropping about 5% over the past couple of weeks alone. It may not have reached bottom, but now may be a great time to buy the burger purveyor, which has thrived in previous market slumps. The combination of its ubiquitous brand and affordable menu results in an unbeatable combination in times of economic uncertainty.

During 2008, at the height of the Great Recession, McDonald's global comparable sales increased by 6.9%. Revenue increased by 3% year over year, pushing earnings per share (EPS) up by 15%. McDonald's stock also outperformed that year, gaining more than 5%, even as the S&P 500 gave up more than 38%.

A McDonald's location at night.

Image source: McDonald's.

McDonald's continued to reward shareholders, bumping up its dividend payment by more than 9% that year, having raised its dividend every year going all the way back to 1976. That streak has now continued for 43 years, with its latest increase of 8% coming in December 2019. The dividend currently yields about 2.4%, and with a payout ratio of just 42%, McDonald's has plenty of room to continue its unbroken string of increases.

Now may be the time to chow down at McDonald's.

2. Walmart: Shopping at a discount

Walmart is another blue chip stock caught up in the recent market turmoil. The stock is down around 5% in recent days, and is off about 7% from its highs in December.

Even during an economic downturn, consumers still need the essentials, though they tend to look for greater discounts. No other retailer is better positioned to appeal to that desire for savings than Walmart. Not only is the company the world's largest retailer, but it remains the go-to destination as a discount store.

The draw is even stronger for consumers during downturns and recessions, as evidenced by the company's performance in 2008. Even as that recession hit its zenith, Walmart continued to buck the downturn, growing sales by 8.6% year over year, while earnings per share grew by 8.2%.  

Walmart customer smiling and looking at smartphone while pushing cart.

Image source: Walmart.

Even as many retailers were slashing their dividends, Walmart not only continued to pay its dividend, but actually increased the payout by 31% compared to 2007, a continuous streak of increases dating back to 1974. That continues today, as Walmart increased its payout by 2% in early 2019, and just last week announced another 2% increase for 2020. 

The dividend currently yields about 2%, and Walmart uses just 27% of its profits to fund the payout, meaning these annual increases will likely continue indefinitely.

This could be the right time to do a little bargain shopping for Walmart stock.

3. Hasbro: Too sick to play

Hasbro is admittedly the riskiest among these recommendations, but also represents the greatest potential for return. The stock was already selling at a discount as the result of the U.S. trade war with China. The uncertainty caused by the on-again-off-again tariffs caused retailers to delay or even cancel orders over the important holiday season. Now that the countries have reached phase one of a trade deal, those issues may finally be behind them.

Unfortunately, Hasbro's supply chain in China -- where many of its toys are produced -- is facing disruption from COVID-19. Those concerns, tacked onto its recent issues, have caused Hasbro stock to fall 20% in the past week alone, and it's down 36% since July. This puts the stock in bargain-basement territory, with a price-to-earnings ratio of 20, its lowest level in more than two years.

There are other reasons to like Hasbro stock now. During the Great Recession, the company -- perhaps counter-intuitively -- continued to prosper, growing its revenue for the fourth straight year, while its earnings increased for the eighth consecutive year. Hasbro attributed its growth during the period to the strength of its partner brands, including Star Wars and Marvel, as well as its franchise brands Nerf and Transformers, among others. The company rewarded investors that year by increasing its dividend by 25%.

Star Wars Millennium Falcon play set

Image source: Hasbro.

Speaking of its dividend, Hasbro currently yields a hefty 3.3%, while using about 65% of its earnings to fund the payout, again its lowest level since early 2018. The company has also raised its dividend every year going back to 2004. 

This bargain won't last long, so investors should buy Hasbro while it's still in play

This too shall pass

The upbeat outlook on these stocks doesn't mean there won't be challenges, as each company has exposure and operations in China. McDonald's has closed hundreds of its restaurants in the Middle Kingdom to help curtail the outbreak. Walmart has reduced hours at hundreds of locations in the country. More than 85% of Hasbro toys sold in the U.S. are manufactured in China, as well as 67% of its global supply.

That said, this outbreak -- like many before it -- will run its course. Even if this leads to a recession, investors who keep their heads and scoop up bargains while others were too busy running for cover will be rewarded over the long term.