3 Dividend Stocks That Can Help You Sleep Better in a Bear Market | The Motley Fool

The stock market has been pretty turbulent so far in 2022, and there’s no sign of that volatility going away anytime soon. This means that many investors are understandably reluctant to add new stocks to their portfolio.

However, some stocks might still be a perfect fit for an uncertain market. Companies that sell things to people need tend to hold up well, and it’s a good sign when a company has a long and consistent track record of paying out and increasing dividends, to name a few things to look for.

Here are three in particular that can provide stable income with recession-proof businesses and also have excellent long-term growth potential.

A dividend aristocrat with a track record of outperformance

Real estate income (O -0.60%) might just be the ultimate “sleep well at night” stock.

If you’re unfamiliar with the business, Realty Income is a real estate investment trust, or REIT, that owns more than 11,700 properties. Almost the entire portfolio is made up of independent buildings (single tenant) and approximately 80% of the tenants are retail businesses. There are smaller concentrations of industrial, agricultural and gaming real estate, but this is primarily retail REIT.

First, Realty Income tenants are mostly recession-proof and also resilient to e-commerce disruptions. Pharmacies, dollar stores, warehouse clubs, and transportation companies are some examples. All of its tenants sign long-term triple net leases, which make tenants responsible for taxes, insurance and maintenance. All Realty Income has to do is buy properties with top quality tenants and enjoy years of predictable and growing income.

The proof is in the numbers. Realty Income has made over 600 consecutive monthly dividend payments and increased its dividend more than 100 times since listing on the NYSE in 1994. The stock has easily outperformed stock total returns S&P500 throughout its 28-year publicly traded history and pays a dividend yield of 4.6% in monthly installments.

An evergreen business with plenty of room to grow

Healthcare is one of the most recession-proof industries, and companies that provide healthcare products and services like Walgreens Boot Alliance (WBA 7.20%) should work very well, even in a deep recession.

Admittedly, there are short-term headwinds. For example, Walgreens’ revenue fell 30% year-over-year in the last quarter, primarily due to lower COVID-19 vaccination volume. Competition from companies such as walmart and Amazon.

However, it is a very profitable business, with a stable core and plenty of room to run. People need prescriptions and health items no matter what the economy does. And Walgreens is gradually building health services into its stores, which could become an important driver of long-term growth.

Given its resilient nature and the long-term potential of its in-store healthcare business, Walgreens currently looks like an incredibly cheap stock, at just 8x past 12-month earnings and with a well-covered dividend yield. by 4.8%.

Possibly the most recession-proof type of real estate

It’s hard to argue that any type of commercial real estate is more recession-proof than medical practices. Not only are medical practice tenants signing long-term leases, but these businesses are in demand no matter how the economy is changing.

Physicians Real Estate Trust (DOC -1.28%) invests in a portfolio of healthcare properties, most of which are medical office buildings that are either located on large healthcare campuses or affiliated with large healthcare systems. The company owns 290 properties and 95% of its spaces are currently leased.

There is also good potential for long-term growth. With the gradual aging of the massive baby boomer generation, the need for health services is likely to increase steadily for decades. Additionally, there is a clear trend towards outpatient procedures as opposed to hospitalization. Physicians Realty Trust pays an attractive dividend yield of 6.3% and offers great long-term upside potential.

Buy for the long term

To be perfectly clear, I have absolutely no idea what these stocks are going to do over the next few weeks or months, and I expect all three to be a bit volatile as long as economic uncertainty persists. . But all three are stable businesses that should do very well no matter how the economy plays out, and all are capable of generating above-market returns in your portfolio.