Whereas an economic recession means a widespread loss of jobs and declining sales for companies, some businesses tend to thrive. What are the best industries to invest in during a recession?
Many economists believe that a recession is inevitable. As the Fed attempts to tame the record-high inflation, there's a risk of an economic downturn. Companies from banking giant JPMorgan to crypto trading platform operator Coinbase and social media powerhouse Meta Platforms have responded by cutting jobs or slowing hiring. Many investors are looking for recession-resistant industries to take shelter in.
What you should know about businesses that thrive in a recession
Food, healthcare, and utility businesses tend to be recession-hardy. When people lose jobs or their incomes decline, they usually respond by cutting expenses. But essentials like groceries, medication, electricity, and water are always a priority.
Therefore, food stocks such as Tyson Foods (TSN), General Mills (GIS), PepsiCo (PEP) can make a difference in your portfolio in a recession. In the healthcare space, pharmaceutical stocks and drugstore stocks such as Pfizer (PFE), Johnson & Johnson (JNJ), Walgreen (WBA), and CVS Health (CVS) can keep your portfolio fit in an economic downturn.
Regardless of the health of the economy, every household will still need water and lighting. American Water Works (AWK) is a leading water and wastewater utility company. Williams Companies (NYSE:WMB) operates a pipeline that moves natural gas to people’s homes for heating and cooking.
Deathcare is an overlooked recession-proof industry
Deathcare businesses range from funeral homes to casket providers and cemetery operators, and a recession has little impact on demand for funeral services. The global deathcare service industry is forecast to grow to $152.8 billion by 2026 from $115.4 billion in 2020.
Whereas deathcare may not be the most comfortable place to invest, it has some of the most rewarding businesses. Below are some funeral stocks with industry-leading dividend yields that you may find appealing for a recession portfolio.
Service Corp International (SCI).
Carriage Services (CSV).
Service Corp International to pay dividends for the foreseeable future
Texas-based Service Corp International operates funeral homes and cemeteries. Its portfolio comprises 1,500 funeral homes and 400 cemetery locations, and the company generates more than $4 billion in annual revenue. It recently boosted its profit outlook for 2022. SCI stock offers a dividend yield 1.37 percent, above the sector average of 0.54 percent. The company expects to continue to pay dividends for the foreseeable future, and it has a share repurchase program.
Carriage Services has survived multiple recessions
Carriage Services (CSV), another Texas-based deathcare service company, operates funeral homes and cemeteries. The company has been in business since 1991, surviving multiple recessions over that period. CSV stock offers a dividend yield of 1.1 percent, above the sector average of 0.54 percent. The company has paid increasing dividends over the past 11 years.
Hillenbrand has paid increasing dividends for 13 years straight
Indiana-based Hillenbrand operates a diversified business, spanning recycling and the sale of funeral products. It sells caskets under its Batesville unit, and in an expansion of its recycling business, Hillenbrand agreed to acquire Herbold Meckesheim. Hillenbrand stock offers a dividend yield of 2.1 percent, beating the sector average of 1.64 percent. The company has paid increasing dividends in the last 13 years.