While the U.S. economy seems to be chugging along fine at the moment, inflation is hitting its highest level since 1981. As interest rates rise to combat inflation, there's also the specter of a recession hitting the economy should high rates damp investment demand and hold businesses back from spending on capital equipment. A downturn may sound like a bad thing, but such economic events are part of the natural ebb and flow of any developed economy.
Investors can also view recessions as opportunities to load up on shares of high-quality, well-run businesses. Such companies should ideally boast a strong competitive moat and brand name, possess an impressive operating track record, and have a proven ability to navigate past downturns successfully. By including such businesses within your investment portfolio, you can sleep well at night while growing your money at the same time.
Here are three stocks you can consider buying during the next recession.
If you're looking for a solid and dependable real estate investment trust REIT to invest in, take a look at American Tower (AMT -0.02%). The owner and operator of a portfolio of more than 220,000 communication sites generates stable rental income from the leasing of these assets to communication companies and wireless service providers. American Tower boasts long-term tenant leases with built-in rent escalation clauses, thus ensuring that its rental income stays dependable and also keeps pace with inflation. High renewal rates are the norm as alternative sites for its clients may not be available, thus assuring shareholders that this flow of income can continue uninterrupted.
The REIT has paid out consistent dividends over the last decade and looks set to continue doing so. Distribution per share stood at $0.90 in 2012 but has surged more than fivefold to $5.21 in 2021, chalking up a compound annual growth rate of 21.5% over nine years. American Tower also announced acquisitions last year that increased its asset base, such as the purchase of Telxius Towers comprising 31,000 communication sites spread out over six countries. The REIT also bought CoreSite late last year for around $10.1 billion, adding data centers into its burgeoning portfolio. These moves should help to diversify American Tower's portfolio and boost its distribution per unit for the long term, thus making it a great stock to ride through a recession.
The healthcare industry is well known for staying resilient through economic downturns, and Stryker (SYK 0.53%) is one of the leading players supplying medical equipment and devices to hospitals, clinics, and healthcare institutions. The company manufactures a wide range of products from digital healthcare monitors and hospital bed frames to emergency response equipment and disposable medical accessories. The company saw its revenue rebound strongly in 2021, rising by 19.2% year over year to $17.1 billion after dipping by 3.6% year over year in the previous year. Operating profit increased by 16.2% year over year to $2.6 billion, while net income climbed 24.7% year over year to $2 billion. Stryker even upped its quarterly dividend to $0.695 per share, 10.3% higher than the previous year, in line with the good results.
Stryker has communicated an optimistic target for this year and expects organic sales growth to be from 6% to 8%, underscoring the stability of its franchise and affirming its track record for growth even through troubled times. The medical-equipment company also has a healthy track record of acquiring to broaden its product portfolio. OrthoSensor, a company dealing with sensor technology for joint replacement, was purchased last year to boost Stryker's orthopedics division. Earlier this year, Stryker announced the acquisition of Vocera Communications, the owner of a portfolio of software and hardware solutions that help caregivers to deliver better patient care, for $3.09 billion. These acquisitions will go a long way to boosting Stryker's product portfolio and diversifying its revenue streams.
And when it comes to dependable dividend payments, look no further than consumer goods giant Kimberly Clark (KMB 0.18%). The company's products are sold in more than 175 countries, and it has paid out a dividend to shareholders for 87 straight years. Kimberly Clark's latest quarterly dividend of $1.16 per share represents its 50th consecutive year of increases, putting it among the ranks of Dividend Kings, those S&P 500 companies that have raised their payouts for 50 years straight or more.
The company has managed to increase sales over the last two years despite the outbreak of the coronavirus pandemic, attesting to its products' wide appeal. Heightened awareness of hygiene has also led to increased demand for Kimberly Clark's hygiene-related products such as tissues and antibacterial wet wipes. The company's outlook has been damped by rising costs that have hurt the bottom line, but this should be viewed as a temporary issue as supply chain bottlenecks and high inflation result in higher input costs. Over the long term, the company should be able to pass on these costs to customers to maintain its gross and operating margins.