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!

| More on:

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.

More on Investing

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

A $7,000 TFSA Won’t Build Itself: This Is the Stock I’d Start With Today

A TFSA won’t build itself, so your first $7,000 should go into a sturdy business you can hold through ugly…

Read more »

Young adult concentrates on laptop screen
Dividend Stocks

The 3 Canadian Stocks I’d Tell a New Investor to Buy ASAP

These three Canadian stocks give new investors dividend income, resilience, and long-term growth across utilities, railways, and bank stocks.

Read more »

person enjoys shower of confetti outside
Dividend Stocks

Starting at 30? $500 a Month Could Grow Past $1.1 Million by 65

Five hundred dollars a month doesn’t sound like much, but over 35 years it can grow into seven figures through…

Read more »

senior couple looks at investing statements
Dividend Stocks

This 3-Stock TFSA Plan Gets Harder to Catch Up On Every Year You Wait

Skipping a year of TFSA investing can not only lose you $7,000, it can cost decades of compound growth.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Stocks for Beginners

2 Undervalued Canadian Stocks Ready to Explode Higher

Improving business trends and long-term growth initiatives give these two undervalued Canadian stocks plenty of recovery potential.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

Waiting 5 Years to Invest $7,000 a Year Could Cost You Nearly $200,000

Waiting five years to start investing can look small today, but it can snowball into a $200,000 gap later.

Read more »

c
Investing

2 Stocks I Like Better Than Enbridge for Long-Term Growth

With reliable business models, strong competitive advantages, and healthy growth prospects, these two Canadian stocks could be excellent long-term investments.

Read more »

the word REIT is an acronym for real estate investment trust
Dividend Stocks

A Perfect TFSA Stock: A 6.7% Payout Each Month

This high-yield TSX stock provides more frequent cash flow, which can be reinvested sooner or used to cover recurring expenses.

Read more »