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6 Top-Ranked Stocks to Ensure a Recession-Proof Portfolio

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The looming threat of recession has been rising in the current year due to a globally weakening macro-economic environment. Uncertainty over the resolution of the U.S.-China trade war, Brexit-related volatility, policy paralyses due to elections in major countries (India, Thailand) and a slowdown in China are signficant headwinds.

WTO, OECD & IMF Lowers Estimates

On Apr 2, World Trade Organization (WTO) lowered its global trade growth forecast for 2019. WTO economists now expect merchandise trade volume growth to decline from 3% in 2018 to 2.6% in 2019.

WTO attributed the lower GDP projections for North America, Europe and Asia for the decline in the current-year trade growth projection. Moreover, “consensus estimates have world GDP growth slowing from 2.9% in 2018 to 2.6% in both 2019 and 2020.”

Earlier, the Organisation for Economic Co-operation and Development (OECD) lowered 2019 world economic growth forecast from 3.5% to 3.3% due to prevalent trade tensions and political uncertainty in Europe. The organization provided a gloomy outlook for Europe, particularly the U.K. due to the lingering uncertainty about Brexit.

 

OECD stated that if the U.K. crashes out of European Union (EU) without a deal, it may see a recession in the near term. This apart, the group had a bleak opinion about China, as well as for most of the emerging markets.

OECD’s lowered forecast followed the International Monetary Fund’s (IMF) footsteps.

How Should Investors Cope With Recession Threat

Apart from the gloomy projections, the yield-curve inversion between the 3-month US Treasury Note and 10-year U.S. Treasury Note has further spooked investors.

The rising recession threat amid global economic slowdown urges investors to take a careful note of their portfolios and re-balance those to counter a downturn. Investing in stocks from defensive sectors such as healthcare, staples, utilities and telecom looks prudent at this time as demand for their products and solutions remains invariant even during an all-encompassing slowdown.

The Zacks Style Score comes handy while picking such stocks. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer good investment opportunities ahead of recession. You can see the complete list of today’s Zacks #1 Rank stocks here.

Here we pick six stocks that also have a dividend yield of more than 4% and market cap greater than $5 billion. Higher dividend yield implies that these companies are more mature, with established customer base and relatively stable revenues, earnings, and cash flow.

Further, these stocks have outperformed the S&P 500 on a year-to-date basis.

Year-to-date Performance

 

 

Our Picks

London-based Rio Tinto Group (RIO - Free Report) is an international mining company with a market cap of $76.34 billion.

The company currently flaunts a Zacks Rank #1 (Strong Buy) and has a VGM Score of A. Further, dividend yield is 6.01%.

The Zacks Consensus Estimate for the current year has surged 21% to $6.28, over the last 60 days.

Houston, TX-based Phillips 66 Partners LP currently carries a Zacks Rank #2 and has a VGM Score of A. The company has a market cap of $6.60 billion.

This master limited partnership (MLP), involved in operating and developing midstream energy infrastructures, has a dividend yield of 6.28%.

The Zacks Consensus Estimate for 2019 has increased 6.1% to $4.37, in the last 60 days.

Toronto-headquartered Manulife Financial Corp (MFC - Free Report) is one of the three dominant life insurers within the domestic Canadian market and possesses rapidly-growing operations in the United States and several Asian countries. The company has a market cap of $34.25 billion.

Manulife has a Zacks Rank #2, at present, and a VGM Score of B. Moreover, its dividend yield is 4.37%.

The Zacks Consensus Estimate for the ongoing year has moved up a penny to $2.19 in 60 days’ time.

Tulsa, OK-based ONEOK (OKE - Free Report) is an energy company, engaged in natural gas and natural gas liquids (NGL) businesses, with a market cap of $28.96 billion.

ONEOK currently carries a Zacks Rank #2 (Buy) and has VGM Score of B. Also, its dividend yield is 4.89%.

The Zacks Consensus Estimate for 2019 has moved 2.1% north to $2.97, over the last 60 days. Earnings are expected to grow 6.8% year over year.

Prudential plc (PUK - Free Report) holds a Zacks Rank #2 and has a VGM Score of A. The company has a market cap of $53.48 billion.

This London-based health, protection and life insurance solutions provider has a dividend yield of 4.33%.

The Zacks Consensus Estimate for the current year has been revised 1.5% upward, in the last 60 days.

Calgary-based TransCanada (TRP - Free Report) is a premier energy infrastructure provider in North America. The company carries a Zacks Rank #2, at present, and has a VGM Score of B.

TransCanada has a market cap of $42.32 billion and dividend yield of 4.97%.

The Zacks Consensus Estimate for the ongoing year has improved 2.1% to $2.91, over the last 60 days.
 

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