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3 High-Yield Stocks Worth Owning If the Market Keeps Crashing

By Jason Hall - Mar 1, 2020 at 5:30AM

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These high-quality stocks have recession-resistant cash flows and will pay you to wait out the market selloff.

Both the Dow Jones Industrial Average and the S&P 500 had their worst week in more than a decade. Both indexes have lost value over eight consecutive trading days, with the S&P down 12.7% and the Dow down 13.4% since Feb. 19.

Could things get worse before the market starts to turn? Sure they could. We saw stocks lose 20% of their value as recently as 2018, but it took more than two months from the October peak (which is almost exactly where stocks are today) to the Christmas Eve bottom. Moreover, there are real concerns that the acceleration of the spread of coronavirus around the world -- which is at the heart of the market's hard and fast drop -- could be enough to start a global recession. 

So what's an investor to do? Start by focusing on the long term and not getting too caught up in what's happening from day to day in the markets. That's easier said than done, but you can make it easier by building a portfolio of high-quality, high-yield dividend stocks that can both ride out the market's short-term hiccups and generate strong results across economic uncertainty. 

Man in suit grabs line on a chart forcing it to turn up.

Image source: Getty Images.

Three that investors should consider right now are Atlantica Yield (AY 0.59%)Brookfield Infrastructure Partners (BIP 1.35%), and CenturyLink Inc (LUMN -0.18%)

The power of recurring revenue

If there's one central component that makes all three of these companies worth owning, it's how they earn money. In short, they rely on recurring revenue for the services that they provide, meaning their customers continue to use the services they provide on an ongoing basis. This kind of business model tends to generate consistent, regular cash flows, and companies can reward investors with steady dividends. 

That's the case with all three of these companies. 

They're also recession-resistant

Not only are their revenues consistent because of the recurring nature, but their businesses are also resistant to the impacts of a recession

For instance, an apparel retailer will feel the pinch when the economy weakens and shoppers put off buying a new pair of slacks. That doesn't tend to happen for these three companies.

Atlantica Yield sells electricity and water to utility-scale buyers, and demand for those things doesn't fall when the economy weakens. 

For CenturyLink, its copper-line telecom business is in decline, but the enterprise-level data services it provides are often mission-critical to its customers. And as 5G expands in coming years, CenturyLink's expansive fiber network should prove very valuable

Brookfield Infrastructure owns and operates a number of different kinds of infrastructure, including telecommunications, water, utility, and energy around the world. Its business is built entirely on the premise of recession- and inflation-resistant assets that can generate steady and growing cash flows. 

Why they're worth buying now

In short, these are three high-quality businesses that the market has started to discount. Since the current market sell-off unofficially began on Feb. 19, the three have seen their stocks fall 10% or more already. 

^SPX Chart

^SPX data by YCharts

That's not as much as the market has fallen, but it's still a pretty steep drop in such a short period, particularly considering these three businesses should prove almost entirely unaffected by coronavirus' impacts on the economy. 

Moreover, it's not unusual for high-quality dividend stocks to fall less than the market in a downturn like this, and it's even possible we'll see them recover very quickly as investors look for opportunities to buy. 

Lastly, all three pay above-average dividends that should help make it easier for investors to hold if the downturn continues or even intensifies. At recent prices, Atlantica, Brookfield Infrastructure and CenturyLink yield 5.4%, 4%, and 8.3%, respectively, with strong cash flows that support continued payouts at the the current level. 

If the market continues its downward spiral, it's nice to have a good reason to hold your investments, but in the bigger picture, if we do see a recession caused by coronavirus, we can expect these three companies to keep plugging along and paying investors for staying the course. 

Jason Hall owns shares of Brookfield Infrastructure Partners and CenturyLink. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lumen Technologies Stock Quote
Lumen Technologies
$11.04 (-0.18%) $0.02
Brookfield Infrastructure Partners L.P. Stock Quote
Brookfield Infrastructure Partners L.P.
$41.88 (1.35%) $0.56
Atlantica Sustainable Infrastructure plc Stock Quote
Atlantica Sustainable Infrastructure plc
$35.48 (0.59%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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