In a bull market, it's common for investors to chase growth stocks for attractive capital gains. However, the market has reversed sharply this year and plunged both the technology-heavy Nasdaq Composite index and bellwether S&P 500 into a punishing bear market. In a sharp U turn, investors are now refocusing their attention on resilience and stability as the bear market drags on.
Some qualities investors should watch for are companies with a portfolio of strong brands, a sturdy franchise, and a long track record of paying out dividends. Possessing these attributes means the company can navigate through tough economic times while doling out a steady stream of passive income.
Food and beverage businesses as well as industrial companies are back in the spotlight as they exhibit such traits and should be able to keep your capital safe in a new era of high inflation and surging interest rates. Here is a list of three resilient stocks that you can consider adding to your portfolio.
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Mondelez International
You may not realize it, but the cookies and snacks you pop into your mouth may just belong to one of the brands of Mondelez International (MDLZ -0.71%). Mondelez owns such famous snack names as Oreo, Cadbury, Milka, Ritz, and Toblerone, and markets its products in more than 150 countries.
Its stable of popular brands has proven resilient during the pandemic, allowing the snack company to post an unbroken rise in revenue from 2019 to 2021. Net revenue increased from $25.9 billion to $28.7 billion over this period, while net income went from $3.9 billion to $4.3 billion.
Aside from seeing its profits rise, Mondelez also generates copious amounts of free cash flow, to the tune of around $3 billion per year.
For the first nine months of 2022, the company continued to post top-line growth, with revenue rising 8.3% year over year to $22.8 billion. Inflation and a sharp rise in expenses, however, have crimped Mondelez's net income for the period, causing it to fall from $3.3 billion to $2.1 billion.
Despite this, free cash flow remained strong for the first nine months of the year at $1.9 billion, allowing the company to keep raising its dividend -- a trend it's maintained since 2013.
In times to come, Mondelez should be able to raise its prices to offset the effects of inflation as it commands strong brand loyalty, allowing the company to continue to post healthy top- and bottom-line growth.
PepsiCo
PepsiCo (PEP -0.41%) is another food and beverage company with a stable of well-known brands. The company sells its signature Pepsi-Cola along with beverage brands such as Mountain Dew and Gatorade, as well as snacks such as Doritos, Lay's potato chips, and Quaker Oats.
PepsiCo's financial numbers attest to how strong its franchise is today. Revenue climbed from $67.2 billion in 2019 to $79.5 billion in 2021. Net income saw a slight dip from $7.3 billion to $7.1 billion from 2019 to 2020, but 2021's net income of $7.6 billion surpassed both years. Free cash flow steadily climbed from $5.4 billion to $7 billion from 2019 to 2021, averaging around $6.2 billion per year. PepsiCo's strong free cash flow generation has enabled the food and beverage giant to raise its dividends for 50 consecutive years, putting it firmly in the ranks of Dividend Kings.
The company has continued posting strong numbers for the first nine months of 2022, with revenue rising by 7.7% year over year to $58.4 billion. Net income, after adjusting for exceptional items, climbed 6% year over year to $6.7 billion. Free cash flow remained strong at $3.8 billion for the period, giving investors confidence that PepsiCo can continue to raise its dividends and weather an economic storm. Inflation is unlikely to be a problem for the company, as PepsiCo has successfully passed on price increases to its customers.
Dover Corporation
Dover Corporation (DOV 4.47%) may not be a household name, but the global manufacturer of industrial products, from pumps and clamps to printing systems and car wash equipment, has been a rock-solid stalwart all these years. Dover is firmly on the Dividend Kings list, with 67 consecutive years of increasing its dividend, an impressive record by any measure. The industrial giant posted steady revenue growth from $7.1 billion in 2019 to $7.9 billion in 2021, with net earnings surging from $678 million to $1.12 billion over the same period. Even after adjusting for a one-off gain for 2021, net income still rose more than 35% to $917.5 million. Dover also generated an average of $880 million of free cash flow per year over these three years.
The company has demonstrated its resilience by reporting a robust set of earnings for the first nine months of the year. Revenue was up 7.6% year over year to $6.4 billion, while net income rose 5.4% year over year to $801.8 million. Dover continued to churn out free cash flow of $301 million for the first nine months of 2022, giving investors confidence that it can continue to raise its dividends.
What's more, the company is also active in acquisitions. In 2022 alone, Dover acquired Malema, a designer and manufacturer of high-precision flow measurement and control instruments in the biopharmaceutical, semiconductor, and industrial sectors. It also purchased Witte Pumps & Technology GmbH, a manufacturer of precision gear pumps. These acquisitions should further help to boost Dover's top and bottom lines for the foreseeable future and solidify the company's market position.
