A recession is suddenly on everyone’s mind after inflation rises unexpectedly by over 9%. With most stocks still down significantly this year, earning a return is hard to come by. Investing in recession-proof stocks with dividends is one way to earn a return despite the economy.

First quarter U.S GDP fell by 1.5%. Will the second quarter show more contraction? At least the Atlanta FED is predicting so. According to recent estimates, the Atlanta FED forecasts –1.5% growth in Q2.

Although GDP is an important, if not most important, economic indicator, a recession is not official until the NBER says so.

Yet two straight quarters of falling growth is often looked at as a sign. For further signs of a recession, look for clues such as:

• Slowing labor market &
• A drop in consumer spending

As prices rise (inflation), consumers are left with less to spend elsewhere in the economy. For example, though gas prices have fallen from record highs, they are still well above last year’s levels.

Find the best recession-proof stocks with dividends below to prepare your portfolio for what’s next.

What Are the Best Recession-Proof Stocks With Dividends

Investors are scrambling to find the top recession-proof dividend stocks to protect their returns. What makes a company recession-proof? And why do dividends matter?

For one thing, dividends are generally seen as a sign of financial strength. For example, a company must earn a steady profit to give investors consistent payouts. Therefore, the top recession-proof stocks with dividends share a few things.

• Strong Cash Flow
• Superior Brand Power
• Goods or Services Deemed Essential

Not only do these companies earn a profit, but they are using the earnings to reward shareholders. Below are the best recession-resistant stocks to add to your watchlist.

No. 3 Lockheed Martin (NYSE: LMT)

• Industry: Defense & Space
• Dividend Yield: 2.75%

The biggest global defense company has gotten a lot of attention this year as the war in Ukraine escalates. But Lockheed Martin stock is down 16% from its ATH close to $480 in March as the market continues selling off.

The company is best known for its advanced military solutions, such as the F-35 fighter jet and state-of-the-art rocket systems. Given the current global events, defense is a major talking point.

Meanwhile, the U.S continues sending military aid to Ukraine. The latest is the 15th since the start of the war, bringing the total defense aid to over $8.0B. With the war in Ukraine intensifying and other allies looking to bolster defense, why is LMT stock down?

Reports have shown several Lockheed Martin products deployed to Ukraine, such as Javelin (anti-tank) missiles and other rocket systems. Though net sales slipped in the first quarter, there are a few noticeable takeaways. For one thing, aircraft deliveries picked up significantly.

For example, f-35 deliveries reached 26 compared to 17 last year. On top of this, C-130J deliveries more than doubled from two in 2021 to five. Yet this is only the start.

Deliveries are expected to pick up as nations boost their military power. To illustrate, Germany intends to buy 35 F-35 fighter jets, while Canada plans to buy 88. Not only that, but the new U.S spending bill boosts several Lockheed Martin programs.

A significant reason LMT’s sales fell in Q1 was Congress disagreeing on a defense budget. With a new budget, I expect to see Lockheed’s sales return to growth in 2022.

Lastly, defense spending generally rises regardless of the economy, making it one of the best recession-proof stocks with dividends to buy in 2022.

No. 2 Proctor & Gamble (NYSE: PG)

• Industry: Consumer Defensive
• Dividend Yield: 2.51%

Although you may not recognize Proctor & Gamble (P&G), you most likely own at least one of their products. For example, the company has several consumer favorite brands in different categories. Here are a few P&G brands.

• Hair Care – Head & Shoulders, Pantene
• Skin Care – Olay, Old Spice
• Grooming – Gillette, Braun
• Oral Care – Crest, Oral B
• Health Care – Vicks, Pepto-Bismol
• Home Care – Downy, Gain, Febreze
• Baby & Feminine Care – Luvs, Pampers, Aways

As can be seen, many P&G products are deemed essential. If a recession does happen, the last things you will cut out of the budget will be things like deodorant, toothpaste, and other necessities.

Proctor continues seeing strong demand for its products, with every category seeing net sales growth in 2021. Despite a slight drop in sales in 2009, P&G held its market share while investing in the business.

Much of what the company discussed in its 2009 annual report is happening today. For instance, oil prices spiked, economic growth slowed, and the U.S dollar surged. With this in mind, P&G overcame lower consumer spending with strong brand (pricing) power.

As a result, P&G returned to growth in 2010 with solid FCF leading to increased dividends and buybacks. Can the company overcome the odds again?

I wouldn’t bet against it. P&G has a rich history of driving value shareholders regardless of the economy. PG stock has only given back double digits twice in the past 20 years, almost 15% in 2008 and 13% in 2015.

Keep reading to find which company tops the best recession proof stocks with dividends list in 2022.

How to Find the Best Recession-Proof Stocks With Dividends

Lockheed, Proctor & Gamble, and McDonald’s are the biggest names in their industries. These companies are the top recession-proof stocks with dividends to buy for a few reasons. For one thing, their brands are second to none.

Furthermore, the businesses have established earnings and cash flow. As a result, they can reward shareholders through dividend payouts and buybacks.

Lastly, the businesses are considered “essential” regardless of the economy. Spending on defense generally increases, people will still buy essential consumer goods, and cheap food becomes more appealing.

These recession-proof dividend stocks have yields over 2% and have stayed that way for years. For investors, this means two things. First, the company has reliable earnings. And second, investors can use steady dividends to multiply their profits in any environment.

Dividend stocks are one of the best ways to multiply your returns even during an economic slowdown.