3 Resilient Stocks to Help Solidify Your Portfolio

Stocks have been under tremendous pressure this year, driven down by concerns that raising interest rates to combat inflation will push the economy into a recession. A deep downturn would affect how much money companies in economically sensitive sectors earn, limiting their ability to make new investments and return cash to shareholders.

However, some companies are more immune to downturns than others because of their more durable business models. Three highly resilient companies are Enbridge (ENB -1.21%), Realty Income (O -0.17%), and WM (WM -1.22%). Because of that, they can help solidify your portfolio by providing some safety amid the current storm.

Built to endure

Enbridge is a leading energy infrastructure company. Its pipeline-utility business model generates very stable cash flow produced from over 40 diversified sources. Roughly 98% of its revenue comes from stable cost-of-service agreements or other long-term contracts with financially strong customers (95% have investment-grade credit ratings). Meanwhile, 80% of its earnings have inflation protection mechanisms. These features make Enbridge one of the energy sector's most resilient and least risky businesses. 

The energy infrastructure giant pays out about 65% of its stable cash flow to investors via a dividend yielding 7.3%. That provides investors with a very tangible return year in and year out. Meanwhile, the company uses the cash it retains and the capacity afforded by its strong investment-grade balance sheet to help finance its continued expansion.   

Enbridge has the financial capacity and secured expansion project backlog to grow its cash flow per share at a 5% to 7% annual rate through at least 2024. Meanwhile, it has a list of expansion projects to keep growing over the longer term. That should give Enbridge the fuel to continue increasing its dividend, something it has done for the last 27 consecutive years. 

A portrait of reliability

Realty Income is a large real estate investment trust (REIT) that owns operationally critical properties. It utilizes long-term net leases (NNN), making the tenant responsible for covering maintenance, building insurance, and real estate taxes. Most of those leases feature rental escalations clauses, often tied to inflation. Because of that, Realty Income produces very stable and steadily rising cash flow.

The REIT pays out about 75% of its available cash via a dividend yielding 5.1%. It uses the funds it retains to complement the flexibility of its top-tier balance sheet to acquire additional income-producing properties.

Realty Income's conservative strategy has enabled it to grow its cash flow and dividend steadily over the years. The REIT has increased its dividend 117 times since its public market listing in 1994, including in each of the last 100 straight quarters. Given its financial strength, it should have no problem continuing to grow its portfolio and dividend in the future. 

The reliability of trash

Garbage collection is a very resilient business, since we still need our trash and recyclables picked up and disposed of during a downturn. Because of that, collections and recycling company Waste Management, or WM, tends to generate very steady revenue, earnings, and cash flow. That gives it the funds to expand its business and return more cash to shareholders.

WM delivered a double-digit dividend increase last year, pushing the yield to 1.7% at the current stock price. That marked its 19th straight year of increasing the shareholder payout. The company also authorized a $1.5 billion share repurchase program to buy back shares as opportunities arise. 

WM also continues to invest in expanding its business. It unveiled plans to spend $825 million through 2025 to grow its renewable natural gas operations to reduce costs and emissions. It also bought a controlling interest in Avangard Innovative's U.S. business to accelerate its film and plastic wrap recycling initiatives. Along with the organic growth of its core operations, these investments should enable WM to continue growing its earnings and dividend in the future. 

Put your portfolio on a firmer foundation

Recessions can wreak havoc on economically sensitive sectors, causing earnings for companies in those industries to decline. However, companies like Enbridge, Realty Income, and WM operate more resilient businesses that tend to produce steady profits regardless of the economy. Because of that, they can be great stabilizers to buy and hold during times like these.