The global economy could face a recession this year. Rising inflation, rising interest rates, and a supply crunch have forced some companies to lay off workers or cut back on investments. We could be on the verge of (or already in) an economic pullback.
Investing during a recession isn’t easy. Seemingly cheap stocks could be traps as their earnings decline. High-yield dividend stocks could cut or suspend their payouts. Growth stocks could disappoint. If you’re a beginner, this environment is difficult to navigate.
Nevertheless, there’s always an opportunity to invest regardless of the economic cycle. Here are the top two recession-proof stocks for beginners in 2022.
Recession stock #1
Shaw Communications (TSX: SJR.B)(NYSE: SJR) surged to roughly $40 a share when it was announced the company would be acquired by Rogers Communication. Rogers is to acquire all Shaw’s outstanding shares at a price of $40.50 a share, which seemed like a done deal just a few weeks ago. Fast forward, sentiments have changed.
The stock has shed nearly 10% in the market from its 2022 highs. It’s currently trading at $36.35 — a 10.2% discount to Rogers’s offer price. Investors are worried regulators will block the deal. However, the stock is still undervalued if the deal falls apart. It’s trading at a price-to-earnings ratio of 18 and offers a solid 3.34% dividend yield, which should be attractive to anyone looking to generate passive income.
If the $26 billion deal is completed, the combined company capable of delivering unprecedented wireline and wireless broadband network investments. It should also offer Canadian consumers greater choice in new telecommunication services. The combined company is poised to invest up to $2.5 billion to enhance its 5G networks over the next five years, which is expected to strengthen its competitive advantage.
Put simply, investors have a shot at 10% upside if the deal closes or a robust company with growing cash flow and dividends if it doesn’t. It’s a safe bet during the recession.
Recession stock #2
Enbridge (TSX: ENB)(NYSE: ENB) is another dividend stock that should be on your radar in 2022. Usually, oil and gas stocks dip during recessions as demand for fuel collapses. However, the economic situation this year is unique. We’re facing an energy crisis due to rebounding demand and an ongoing conflict in Eastern Europe.
Enbridge’s network of pipelines is expected to carry more fuel this year than before the pandemic. Demand for fuel is expected to stay elevated for several years as we struggle to boost production. Meanwhile, energy exports from the U.S. to Europe are yet another tailwind for energy companies like Enbridge.
The company has sustained steady dividend growth through previous cycles. In fact, Enbridge has boosted dividends every year for 67 years! Investors can certainly expect more growth in the years ahead. This 5.8% dividend stock should be on the top of your watch list for 2022.
