Between the Russia-Ukraine war, the highest inflation to hit the U.S. in 40 years (7.9%), and ongoing supply chain issues affecting a broad array of industries, investors have been feeling a high degree of economic uncertainty over the last few months. As a result, the stock market has been quite volatile. The Federal Reserve has pledged to raise interest rates from their current rock-bottom lows to curb inflation, but it will have to perform a delicate balancing act to ensure that those moves don't trigger a recession. Meanwhile, technology stocks, in particular, have sold off sharply, and tech-heavy the Nasdaq Composite Index has entered bear market territory.
It's unnerving to see the value of your portfolio plummet. That's why, during crashes and downturns, it's a good strategy to hold investments in companies that have both proven competitive edges and resilient business models. Strong and recognizable brands also help businesses to retain their momentum during rough periods. And if they are reliable dividend payers, even better -- that's a signal of healthy, steady cash flow generation, and those payouts can tide investors through challenging times in the market.
These three stocks offer all of those characteristics and should make for safe bets to hold during a market downturn.
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1. Visa
Visa (V 0.68%) is one of the largest digital payment companies in the world, facilitating transactions between consumers, banks, and merchants in more than 200 countries. The company has proven its mettle during the pandemic, chalking up net revenue of $24.1 billion in its fiscal 2021, which ended Sept. 30 -- up from $23 billion in fiscal 2019. Operating income and net income were also running slightly ahead of their pre-pandemic levels, at $15.8 billion and $12.3 billion, respectively.
The pandemic shifted a significant new share of transactions to Visa's network. Payments volume rose from $8.8 trillion in fiscal 2019 to $10.4 trillion in fiscal 2021, while the number of transactions processed rose from 138.3 billion to 164.7 billion over the same period. This momentum has carried on into the first quarter of fiscal 2022, with Visa reporting a 20% year-over-year jump in payments volume along with a 24% year-over-year increase in net revenue.
The company also has an impressive track record of dividend hikes, having raised its payout every year since it went public in 2008. Visa's latest quarterly dividend was $0.375 per share for an annual payout of $1.50 per share. At current share prices, that yields about 0.8%. There could be more good news to come for investors, as Visa recently announced that consumer spending momentum has resumed as COVID-19 case numbers have fallen from their omicron-wave peaks. The company also recently completed its acquisition of Tink, an open banking platform that facilitates the building of financial products and services by financial institutions and fintech companies. That purchase should help Visa to extend its reach and garner a wider customer base.
2. Procter & Gamble
If you're scouting for a reliable investment in the consumer goods sector, look no further than Procter & Gamble (PG 0.43%). The owner of 60-plus popular brands including Pantene, Gillette, and Oral-B, Procter & Gamble sells its products in more than 180 countries and has been in business since 1837. Despite the pandemic, the company has grown its sales consistently over the last five years, from $65.1 billion in fiscal 2017 to $76.1 billion in fiscal 2021, which ended June 30. Operating cash flow improved from $12.8 billion to $18.4 billion over the same period, and its per-share dividend payout also increased from $2.70 in fiscal 2017 to $3.24 in fiscal 2021. And with an enviable record of raising its dividends for 65 consecutive years, it holds the rare distinction of being a Dividend King.
The company continues to report healthy results. In its fiscal 2022 second quarter, which ended Dec. 31, net sales rose 6% year over year to $20.9 billion while net income rose 10% to $4.2 billion. For the first six months of its fiscal 2022, Procter & Gamble generated $8 billion worth of free cash flow -- more than sufficient to support its growing dividend payments. The company has also committed between $9 billion and $10 billion to stock buybacks as another way of enhancing shareholder value.
3. Nike
Investors can count on Nike (NKE 0.75%) to deliver the goods. As one of the world's largest and most reputable sports apparel and footwear brands, it's known for its innovative sports shoes that help to maximize athletes' performance. And on the business front, its successful pivot to a model more focused on direct online sales mitigated the impact of brick-and-mortar store closures during the pandemic. In its fiscal 2021, which ended May 31, revenue rebounded strongly to $44.5 billion -- compared to $37.4 billion in fiscal 2020 -- while net income of $5.7 billion surpassed the pre-pandemic level of $4 billion from fiscal 2019.
Nike continues to post growth. During its most recently reported quarter -- fiscal 2022's Q2 (ending Nov. 30) -- digital sales were up 12% year over year and gross margin increased by 2.8 percentage points to 45.9%. For the first half of fiscal 2022, revenue increased by 8% year over year while net income climbed by 16% to $3.2 billion. The company continued to generate a healthy free cash flow of $3.5 billion and also announced its 20th consecutive annual dividend increase, boosting its quarterly payout to $0.305 per share.
Nike is poised to accelerate its digital transformation with the acquisition of RTFKT, a maker of virtual sneakers and crypto-collectibles. The company hopes to tap into this business to create and sell non-fungible tokens (NFTs) of sneakers and other Nike-branded collectibles, thus opening up an additional and potentially lucrative source of revenue.
