1 Top Stock That Could Rise in a Recession

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) stock looks like a great dividend-growth play that could hold its value in a potential 2023 recession!

With the inverted yield curve in the United States, we’ve been hearing a lot about the next recession, which could kick in as soon as 2023. For many beginner investors who’ve already felt the pain of the latest stock market correction (in the S&P 500 and Nasdaq), it’s really hard to continue buying stocks with the possibility that they could get crushed further.

Indeed, the S&P 500 is off around 8.5% from its high after a choppy start to 2022. It could easily get worse with the war in Europe and the ongoing coronavirus crisis. Add a less-accommodative U.S. Federal Reserve and Bank of Canada into the equation, and the stage looks set for meagre performance from the market averages moving forward.

Why investors should stay invested as recession fears rise

A recession and worsening of the stock market selloff could easily be right up ahead. And although the inverted yield curve is an indicator that’s not to be ignored, I think that the severity of the next recession may be exaggerated. A recession may or may not hit. But even if it does, it could see a sharper-than-expected recovery like the one experienced back in 2020.

The Fed stepped in, and Mr. Market has not looked back until now. As the Fed takes its foot off the gas and starts raising rates at a fast pace, some fear that markets and the economy could pick up where they left off in 2020.

Could it be that the Fed’s 2020 rescue was merely just a delay in the economic pain to be had? Or has the economy had enough time to strengthen its legs so as to not be knocked out by the rate hikes to come?

The Fed looks for a soft landing, as it rips the band-aid off

Personally, I think the Fed will not sacrifice all the progress the economy has made to stomp out inflation. It’s possible that they can have the best of both worlds as they look to leverage their tools to engineer a soft landing. Doubt the Fed if you will, but they can help navigate the ship through these choppy waters. Arguably, Fed chair Jay Powell and company have done a magnificent job thus far. Though many pundits may criticize the man for the less-than-perfect inflationary environment we’ve living in right now.

No, it’s not ideal, but tough times seldom last forever. That’s why I believe investors should continue to stick with the game plan, even in the face of a recession. If anything, a recession may already be mostly baked in here! Further, higher rates could reverse once evidence of disinflation arises. I think that’s a likely scenario that could see investors scoop up bonds, driving prices higher and yields lower — perhaps much lower.

Algonquin Power: A value play I’d look to buy even in the face of a recession

In this piece, we’ll have a closer look at one value stock in Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) that’s well equipped to rise, even as the GDP contracts. The renewable power play has been lagging of late, but the recent oil spike is likely to accelerate the global transition towards green power (people are getting sick of high oil prices already!). This makes the green energy secular tailwind that much stronger, and it’s a tailwind that could last for many years, if not decades.

In any case, Algonquin stock offers a juicy 4.3% dividend yield at just shy of $20 per share. While Algonquin has endured idiosyncratic challenges since 2020, I view the firm as more than capable of making it through the less-than-favourable environment.

Algonquin may have lost its way, but it’s an underdog that’s capable of above-average dividend growth and appreciation, once management irons out the wrinkles.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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