The first half of 2022 marked the worst start to the year for the U.S. stock market in over 50 years. Between 40-year-high inflation, a weakening housing market, rising interest rates, high prices at the pump, and ongoing geopolitical tensions, there's a lot to digest as investors think about the best way to position their portfolios for the second half of 2022 and beyond.

While it may be tempting to sell everything and walk away, a better approach is to make sure you are holding companies that have what it takes to outlast a prolonged bear market and/or recession. Nucor (NUE -0.26%), Procter & Gamble (PG -0.11%), and 3M (MMM -1.09%) stand out as three particularly good buys now. Here's why.

A welder working on a steel girder.

Image source: Getty Images.

Galvanize your portfolio with Nucor

Nucor is the largest U.S.-based steel company by market capitalization. But the steel business is highly cyclical, leading to big swings in earnings even for a leader like Nucor. For example, in 2020, Nucor had a down year as demand for steel ground to a halt during the height of the COVID-19 pandemic. Fast forward to 2021, however, and Nucor posted record high earnings. The stock reached an all-time high in April but has since fallen 34% in the last three months, as investors fear a recession could lead to lower demand even in a supply chain-constrained environment.

To offset this cyclicality, Nucor has built a reputation for returning value to shareholders through share buybacks and dividend raises. Over the last five years, Nucor has lowered its outstanding share count by over 16% by repurchasing its own stock, which boosts earnings per share for existing shareholders. What's more, Nucor is now a member of the coveted list of Dividend Kings, which are S&P 500 components that have paid and raised their dividends for at least 50 consecutive years.

That means that Nucor paid and raised its dividend every year throughout the 1970s period of high inflation, the 1980s recession, the early 2000s dot-com bust, the financial crisis of 2007 to 2009, the U.S.-China trade war, and the COVID-19 pandemic.

Nucor has spent the last few boom years strengthening its underlying business, mainly through key acquisitions. That way, it's better positioned for future downturns. Nucor can't control the whims of the broader market. But it can build shareholder trust through buybacks and dividend raises, and by demonstrating it is best in breed. Dividend investors would be wise to view the recent sell-off in Nucor stock as a buying opportunity.

A role player you can rely on

Procter & Gamble (P&G) is one of the largest U.S.-based consumer staples companies by market cap. Known for top brands like Tide, Pampers, Charmin, Bounty, Gillette, and more, P&G has, for decades, generated low to mid-single-digit organic growth no matter the market cycle. In many ways, P&G is the ultimate role player in a diversified portfolio. It's probably going to underperform a strong bull market, but it's also likely to outperform a bear market because its business is less correlated with the broader economy than more cyclical industries like steel, construction, and consumer discretionary.

So far this year, P&G stock is down a little over 11%. But that is far better than the broader indices.

Chart showing Procter & Gamble and Nucor outperforming the NASDAQ, Dow Jones, and S&P 500, and 3M underperforming them.

PG data by YCharts

P&G stock's low volatility is ideally suited for dividend investors or retirees who care more about capital preservation than capital appreciation. Investors with a shorter time horizon can't afford massive drawdowns in the companies they own and typically prefer not to invest in high-growth names or cyclical companies. P&G not only does well no matter the market cycle, but it is also one of the longest-tenured Dividend Kings -- having paid and raised its dividend for 66 consecutive years. 

In the past, P&G tried to grow its business by overexpanding into new geographies and increasing its brand count. But since its restructuring between fiscal 2015 and 2017, P&G is a much leaner company that focuses only on its top brands and product categories and achieves a lot of its growth through share buybacks.

With a 2.5% dividend yield, P&G provides a reliable source of passive income even in a recession.

A high-yield stalwart in the bargain bin

Unlike Nucor and P&G, which have demonstrated exceptional capital allocation and management, 3M is much more of a mixed bag. It has been a market underperformer for years and is currently within striking distance of an eight-year low. 3M's underperformance paired with dividend raises has ballooned its dividend yield to 4.6% -- making it one of the highest-yielding stocks in the Dow Jones Industrial Average. However, 3M needs to prove it can do a better job combating inflation and supply chain constraints, which have so far taken a sledgehammer to its profit margins and growth.

3M has its fair share of problems, but investors are getting a good price for the stock. It has a price-to-earnings ratio of just 13.4 -- which is the cheapest 3M stock has been in over a decade. Given its mismanagement during this economic downturn, I wouldn't count on 3M to turn its business around anytime soon. But when it comes to high-yield dividend stocks that are likely to continue paying and raising their dividends, 3M stands out as an inexpensive option to consider now.

Achieve peace of mind with this dividend basket

Investing in equal parts of Nucor, P&G, and 3M gives an investor a dividend yield of 3% and exposure to three completely different sectors of the economy. During times of high volatility, investors can take solace knowing that all three companies have what it takes to outlast a multi-year recession. What's more, all three companies provide income without the need to sell stocks at lower prices, which makes it easier to be patient and let the stock market downturn run its course.