Retirement: 10 Recession-Proof DGI Stocks (Almost)

Until mid February this year, markets were making new all-time highs. The economy was doing great, the unemployment numbers were at a record low, and we were in a prolonged bull market. However, all that changed dramatically when not only the U.S. but the entire world was overtaken by the coronavirus pandemic and its devastating effects on the economy of every major country. The pandemic is still with us in many ways, but the markets have made a remarkable recovery, and in fact, the S&P 500 crossed its all-time high last week and making new records. Many people feel that market action is not in sync with the real economy, which is still struggling to come back. That said, no one knows where the market will be in three months or six months from now. Making a future prediction, especially about the stock market, is a futile exercise.

We all like to be optimistic about the future and rightly so, but the recent market panic and subsequent recovery is a reminder that we need a well thought-out strategy that’s capable of dealing with both the good times and bad. We should not be taking risks that we cannot afford. But that does not mean that we shouldn’t be investing for the future.

The below chart demonstrates the market action of the last 12 months.

S&P 500 (SPY) 12-months chart:

Data by YCharts

From time to time, we like to study and analyze how different companies and their stocks behave during serious crisis situations. Obviously, everything is in the context of the broader market, as represented by the S&P 500. For this article, we will adopt a slightly different approach than our previous article on this topic. Data for the previous article was analyzed in May 2020 when we were still in the midst of the pandemic-induced crisis. However, now it appears that the stock market has shaken the bear and charted its course on a new bull market. We will do two things to analyze the available data from the recent crisis and then from the previous four stress periods:

  1. We start with 751 dividend-paying companies from the CCC-List (see note below). Since we are interested in dividend stocks paying reasonable yields, we filter out the companies that have dividend yields less than 1.50%, leaving us a set of 543 stocks. Then, we would see which companies had excelled the S&P 500 in coming out of the recent crisis period and are showing higher gains than the S&P 500 during the period starting from Feb. 19 (when the crisis began) and until Aug. 21. We shortlist 118 such stocks.
  2. Then we analyze these 118 companies as to which ones outperformed the S&P 500, each of the previous four crises or corrections, going back to the 2008-2009 financial crisis. We also make a second list of companies that outperformed the S&P500, at least three out of four previous stress periods.

Note: CCC-List is a list of Dividend Champions, Challengers, and Contenders, originally created by David Fish and currently compiled by Justin Law. Dividend champions are companies with 25 years (or more) of rising dividend history. Dividend contenders have 10-25 years of rising dividend history, whereas dividend challengers have between 5-10 years of rising dividend history.

Lessons that we can learn from the Current and Previous Market Corrections:

A market environment like the current one reminds us of the importance of a well thought-out strategy that can withstand both the good times and bad. From time to time, we want to see how different stocks or securities react to market conditions during times of stress and also during the subsequent market recoveries. Obviously, the recent crisis was unique in many ways due to the fact that it was induced by a major pandemic. The 2008-2009 financial crisis also was unique in many ways. So, it’s important to look at a mix of different corrections like the ones we witnessed in the fourth quarter of 2018, market slog during the summer of 2011, as well as 2008-2009 crisis. We wanted to restrict our study to only dividend-paying stocks. So, we started with 751 stocks that are listed in the CCC-list. However, we filter out stocks that yield less than 1.50%, leaving us 543 stocks. We are going to look at the behavior and price declines (or advances) of our selected securities during the following periods:



S&P 500 Decline or advance.


Feb. 19, 2020 – Aug 21, 2020

(Correction and Recovery)



Feb. 19, 2020 – Mar. 23, 2020



Sep 20, 2018 – Dec 24, 2018



Apr 29, 2011 – Oct 3, 2011



Oct 11, 2007 – Mar 9, 2009


Stocks that Outperformed the S&P 500 During the Recent Recovery:

As stated earlier, our initial list consisted of 543 stocks from CCC-List (after filtering out stocks yielding < than 1.50%). This is still a very large set that’s not presentable here. The next step was to check the performance of these 543 stocks during the recent recovery period, starting from Feb. 19, 2020, until Aug. 21, 2020, and comparing the same with the performance of the S&P 500. There are 89 stocks (from the list of 543) that have outperformed the S&P 500 during this recovery period. There are another 29 stocks that have only slightly underperformed. We keep these 118 stocks on our list for further analysis. These 118 stocks are presented below in an excel file, for the benefit of readers who may want to do further research or analysis.


DGI Stocks That Outperformed S&P 500 During the Previous Four Stress-Period (all four times):

The four stress-periods and the decline of the S&P 500 are listed below:

  • Feb. 19, 2020 – Mar. 23, 2020 (-34.10% decline)
  • Sep 20, 2018 – Dec 24, 2018 (-20.18% decline)
  • Apr 29, 2011 – Oct 3, 2011 (-19.42% decline)
  • Oct 11, 2007 – Mar 9, 2009 (-56.19% decline)

Among the 118 DGI stocks on the first list (provided above), 25 of them fared better than S&P 500 during all four instances of stress periods, including the 2008-2009 recession and the recent pandemic panic. A view of the same is presented below.

(AMGN), (AMT), (CHRW), (CL), (CLX), (CNI), (DGICA), (DLR), (ERIE),

(FAST), (FLO), (HRL), (JNJ), (KMB), (KR), (LANC), (LIN), (LLY),

(NEE), (PFE), (PG), (SJM), (VZ), (WMT), (XEL).

Table-2 (sorted on Ticker):

Table-2A – (Same as Table 2, but each period sorted in order of decline/ advance):

Stocks That Outperformed At Least Three Out of Four Stress Periods:

Another set of 26 DGI stocks (out of 118 from the first list) that fared better than S&P 500 at least three out of four instances.

Table-3: (Each period sorted in order of Decline / Advance)

Please note that we have not included the dividends received during these stress periods while calculating the returns for a specific period. If we were to include dividends, we expect the results would be even better for most dividend stocks, since most of these stocks yield better than the S&P 500.

The Top 10 Stocks That Are Recession Resistant:

We start with 25 stocks that have outperformed the S&P 500 in each of the four recession or stress periods. Below are the 25 stocks listed in the order of the gain during the recent recovery, along with additional relevant data. As such, this is quite a good and diversified collection of 25 stocks that should do well in the future.


Note: DGR5 and DGR10 represent “Dividend Growth Rate” in the last 5 and 10 years, respectively.

However, if we were to select just ten stocks from this list of 25, we would select the following. This step is 100% subjective and based on our perspective.

We think these ten stocks make a balanced choice, in terms of protecting investor capital in case of a recession, and providing very decent growth overall:


So, now let’s see how a portfolio of these ten stocks would have performed since 2008 in comparison with the S&P 500. This assumes acquiring these 10 stocks in equal proportions and staying invested in them until August 2020 (annual rebalancing). This portfolio beats the S&P 500 hands down with an annualized return of 14.3% compared to 8.7% of the S&P 500. Please see the comparison chart below.

Now, what if we did not invest beginning 2008, but some other year, say begging of the year 2011 or 2015. We provide below the performance comparison of our 10-stock portfolio with the S&P 500 if we invested at the beginning of any year (between 2008 and 2020) and held the investment until August 2020. The 10-stock portfolio outperformed every time.

Concluding Remarks

Each major correction is of unique nature and usually a result of some underlying weaknesses or crisis, a major negative event, the change in the economic cycle, or rising stock prices being unsustainable in terms of earnings power. That said, it’s still worthwhile to study and analyze past crashes and determine which kind of sectors and companies have inherent advantages to do well in both the good times and bad. However, being a DGI and income investor, we keep our analysis limited to DGI stocks. So, with that spirit, we compared the most recent crisis and the recovery to see which DGI stocks had come out better than the broader market. We then compared the behavior of these stocks during four major stress periods over a span of the last 12-13 years. This analysis highlighted 25 companies that have the tendency to defy gravity and tend to do relatively well in the face of adverse economic conditions. Sure, nothing works the same forever, and there will always be changes in the future, but on a generalized basis, if we can pick more winners than losers, we will do well in the long run.

In total, we highlighted about 50 companies, 25 being super safe, and the other 25 as reasonably safe. One could select 10 companies from this list of 50 stocks based on the individual’s need for income and risk profile. The portfolio should be well diversified with exposure to different sectors and industry segments. In our estimation, such a portfolio would lose less than 50% of the S&P 500 during any future correction. However, please bear in mind that this is just an educated guess based on our research of past data, but there are no guarantees for the future.

To be clear, most of these stocks in our top 10 or top 25 are no longer cheap today, especially after a remarkable recovery from the lows of March, so we are not recommending just to go out and buy these stocks in full positions today. Each individual should consider his or her personal situation, the time horizon, financial goals, and risk tolerance before making any investment decisions. However, if you are thinking of converting your portfolio away from risky assets and moving to safer dividend stocks, we believe this is a methodical approach to make a diversified, income-producing, and recession-resistant portfolio that also can serve well for the long term.

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Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, UNH, CL, CLX, GIS, UL, NSRGY, PG, KHC, ADM, MO, PM, BUD, KO, PEP, D, DEA, DEO, ENB, MCD, BAC, PRU, UPS, WMT, WBA, CVS, LOW, AAPL, IBM, CSCO, MSFT, INTC, T, VZ, VOD, CVX, XOM, VLO, ABB, ITW, MMM, LMT, LYB, ARCC, AWF, CHI, DNP, EVT, FFC, GOF, HCP, HQH, HTA, IIF, JPC, JPS, JRI, KYN, MAIN, NBB, NLY, NNN, O, OHI, PCI, PDI, PFF, RFI, RNP, STAG, STK, UTF, TLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. The author is not a financial advisor. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. The stock portfolios presented here are model portfolios for demonstration purposes.

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