3 “Ultra-Safe” Stocks to Protect You From the Next Recession

If you’re worried about a recession, utility stocks like Fortis Inc (TSX:FTS)(NYSE:FTS) can be your best friend.

| More on:
Economic Turbulence

Image source: Getty Images

We’re heading into fall, and recession worries are in the air. Recently, the New York Fed released a set of charts that pegged the probability of an upcoming recession at 38%. These charts used the three to 10 year bond spread — one of the most reliable recession predictors — as the basis of their forecast.

In the past, the probability of a recession as predicted by the spread was much higher: in 1982, it reached over 90%. Nevertheless, the probability of a recession as predicted by this model is the highest it’s been since 2008.

This means that now would be a good time to start recession-proofing your portfolio. When the majority of economists and several historically reliable models tell you a downturn is coming, you listen.

With that in mind, here are three stocks that have a good chance of performing well in the event of a major North American recession.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is Canada’s largest publicly traded utility company. It supplies power to customers across Canada, the U.S., and the Caribbean. The company boasts 3.3 million utility customers and $52 billion in total assets.

As a regulated utility, the company enjoys high barriers to entry and a kind of government-enforced economic moat. The fact that Fortis is a utility means it also stands to do well in recessions, since heat and light are bare necessities that people can’t cut out even in the worst of times.

The stock pays a dividend that yields 3.24% and has been raised every single year for the past 45 years.

Kirkland Lake Gold

Kirkland Lake Gold (TSX:KL)(NYSE:KL) is a young gold mining company that has been going absolutely ballistic in the markets over the past few years.

Since the beginning of 2016, it’s up 2,099% — yet still isn’t overly expensive, with a P/E ratio of 26. When you look at this company’s recent performance, it’s not hard to see why it’s done well. In its most recent quarter, it mined over 200,000 ounces of gold, increased its earnings by 69%, and grew sales by 31%. It also reduced its cost per ounce mined by 29%.

Nobody will deny that this is a high-growth stock. What most probably don’t realize is that it’s also a fairly “safe” bet for a recession, since investors flock to the perceived safety of gold in hard economic times.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) is a utility stock like Fortis. Much like FTS, it owns assets in both the U.S. and Canada. In fact, with 750,000 customers in the states, its U.S. operations dwarf its Canadian ones.

What makes Algonquin a safe bet for a recession is the fact that, like Fortis, it’s a regulated utility whose services won’t suffer much in hard economic times. However, it may be an even better bet than Fortis. For one thing, its dividend yield is higher at 4.25%.

For another, it’s pursuing an aggressive acquisition strategy that could boost its results in the next few years. Just recently, the company acquired Empire District Electric — a move that added a full 200,000 customers to its list. Big acquisitions like that can be risky, but they can also drive growth.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

More on Dividend Stocks

Dividend Stocks

3 Expensive TSX Stocks I’d Buy if They Took a Dip

Three relatively expensive large-cap stocks are on my buy list if their prices dip in the next market correction.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How I’d Invest $1,000 in October to Generate Passive Income for Life

You can earn reliable passive income each year by investing $1,000 in this Canadian dividend stock right now.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

TFSA: Invest $45,000 in These 3 Stocks and Get $2,392 in Passive Income

Here are three of the best Canadian dividend stocks TFSA investors can consider buying right now to earn handsome passive…

Read more »

Modern buildings in business district
Dividend Stocks

3 REITs Offer a Good Mix of Growth Potential and Dividends

The real estate sector in Canada is still heading downwards, and the stocks are mimicking the pattern, so you can…

Read more »

potted green plant grows up in arrow shape
Dividend Stocks

2 of the Best Dividend Stocks to Buy for Growing Passive Income

If you're building a long-term portfolio, these two dividend stocks are some of the best investments to buy for growing…

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

Create $500 in Tax-Free Passive Income With $0 in the Bank

Even if you don't have a cent to invest, you can start creating passive income to allow you to create…

Read more »

Dividend Stocks

Passive Income: 2 Dependable Dividend Stocks to Buy Today and Own Forever

Now’s a great time to think about building a passive-income stream. Here are two dividend stocks to have on your…

Read more »

Dividend Stocks

3 Dirt-Cheap TSX Stocks (With +5% Yields) to Buy Right Now

Here are three dirt-cheap TSX stocks that trade with elevated dividend yields and solid growth prospects ahead.

Read more »