3 stocks that raised their dividends in each of the last 3 recessions

The economy does not always grow; recessions occur when the economy contracts, which can have real-world consequences for consumers, businesses, and the stock market. Despite talk of recession intensifying in the media, no one knows when the next recession will occur or how bad it will be. Investors can prepare their portfolios by looking for stocks with a proven track record of long-term growth.

Dividend stocks are great for this. Companies that have increased their dividends for the past 25 consecutive years have done well enough to continue paying shareholders more despite downturns in the wake of the dot-com bubble, the financial crisis and the height of the COVID-19 pandemic. 19.

Only high-quality companies with sustainable competitive advantages, prudent management teams and sound fundamentals can pull this off.

Here are three stocks from that group that investors can count on through thick and thin.

1. RTX

Some industries may slow down when the economy lags behind, but defense and aerospace rarely stop moving. RTX (NYSE: RTX) is a leader in both sectors. The company was formed after a recent merger, joining Raytheon with United Technologies and creating a three-headed conglomerate. RTX’s core business includes building aviation systems for private and military applications, jet engines for commercial and military aviation, and various defense and weapon systems for the military. Big mergers sometimes backfire, but RTX remains in solid financial shape with an investment grade credit rating.

RTX has a 31-year dividend growth streak that should continue for years to come. RTX will pay $2.52 per share in dividends this year, less than half of the $5.44 I think the company will earn. Furthermore, these revenues are poised to grow by more than 10% annually over the next three to five years. Investors can enjoy a solid initial yield of 2.1% and can reasonably expect double-digit growth.

Remember that defense and aviation are highly regulated industries with constant demand. The COVID-19 pandemic was an unprecedented event that virtually brought the aviation industry to a standstill. It’s the only time RTX’s annual revenue has fallen 15% or more in decades. And yet, RTX still raised the dividend. Investors can feel confident in owning this diversified dividend stock with long-term growth potential.

2. Sherwin-Williams

Paints and coatings are remarkably simple products that generate recurring sales from new builds, home construction and renovations. Sherwin-Williams (NYSE:SHW) leads the industry and is a dividend rock star with an active dividend growth streak spanning 46 years. There aren’t many properties when it comes to paint, but Sherwin-Williams boasts a strong brand that resonates with DIYers and construction professionals alike. Sherwin-Williams sells its products through company-owned stores, retail stores and distributors. It’s a boring business, but it has staying power; paints and coatings will probably never become outdated.

The story continues

Investors won’t find a colossal initial return here; Sherwin-Williams has just 0.8%. However, the rapid appreciation of the share price helps to compensate for this. Stocks have outperformed S&P 500 in the last decade. Dividends make up just a quarter of the company’s estimated 2024 earnings, so there’s plenty of room for future dividend increases that will easily outpace inflation.

Sherwin-Williams is very consistent; annual earnings have fallen by more than 10% only once since the early 1990s. Growth investors should consider Sherwin-Williams a dynamite agent that has room to raise its dividend dramatically over the next decade and not only.

3. NextEra Energy

Renewable Energy has been growing steadily for decades and is a leading renewable energy company NextEra Energy (NYSE: NEE) was a big winner. It operates wind and solar energy products, energy storage and America’s largest electric utility, Florida Power & Light. The company issues debt and equity to finance its energy projects, but management generates enough profit to turn a profit and pay investors dividends. NextEra’s growth and dividends have generated market-crushing total returns since the 1980s, despite doubling its share count.

The company has increased its dividend for 31 consecutive years. Investors will receive $2.06 this year for each share they own, about 65% of NextEra’s expected earnings per share. Investors shouldn’t worry that management will continue to cut those dividend checks; NextEra’s utility business is virtually recession-proof because people always need electricity and renewable energy is getting bigger.

Today, wind and solar energy still contribute only 13% of America’s total electricity, but that number is about to grow. This growth will have an impact on all renewable energy companies, but NextEra’s title as the world’s leading producer almost ensures that the company will continue to grow in the future.

Should you invest $1,000 in RTX right now?

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions and recommends NextEra Energy. The Motley Fool recommends RTX and Sherwin-Williams. The Motley Fool has a disclosure policy.

3 Stocks That Raised Their Dividends in Each of the Last 3 Recessions was originally published by The Motley Fool