Before I begin, there isn’t any stock in the world that can provide protection from downturns and economic turmoil. That being said, there are certain dividend stocks that have come to be known as “recession resistant.”
These dividend stocks are perfect options when interest rates rise, as they aren’t necessarily affected by the rise in rates. What’s more, should a recession come down on investors, these stocks are likely to continue performing well, as they provide essential services no matter what happens.
As interest rates rise to 5% from the Bank of Canada on July 12, let’s look at some stocks that could provide protection if rates rise even further.
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Brookfield Infrastructure
Brookfield Infrastructure Partners (TSX:BIP.UN) is a strong choice as an infrastructure stock. It holds a global portfolio of diverse assets, ranging from renewable energy to telecommunications structures. Infrastructure in general also stands to gain from government protection, as no matter what happens in the economy, we need roads, power, and internet.
The company’s second-quarter report is due anytime. However, during the last quarter, it’s a dividend stock that proved it should continue to perform well, even if a recession hits. The company increased its funds from operations (FFO) to $554 million year over year, with organic growth rising 9% as well. While net income dropped to $23 million from $70 million the year before, the company continues to grow its base business through acquisitions. The cash should come right back to shareholder pockets.
As acquisitions continue, it’s likely investors will continue to see shares rise. Brookfield Infrastructure stock currently offers a dividend yield of 4.4%, with shares down 4% in the last year. However, it’s now recovering strongly and up 23% in the last three months alone.
Extendicare
Another area of the market considered “recession resistant” is health care. But when it comes to growth in this industry, there perhaps isn’t a better opportunity than through senior living and long-term care. The baby boomer population continues to age, with more options becoming available. Extendicare (TSX:EXE) could therefore provide stable protection now and growth later.
There has been a major improvement in results over the last while, with Extendicare stock looking to get back to where it was before the pandemic. The first quarter brought in $31 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), with a higher recovery of COVID-19 costs. Home healthcare volume also increased, up 6.1% year over year, with long-term-care occupancy boosted to 95.1%.
Now that the worst looks to be behind the company, investors have been back on board. Shares of the Extendicare stock are up 5.7% among dividend stocks in the last year and 13.6% in the last three months. You can also grab a 6.6% dividend yield as of writing.
Boston Pizza Royalties
It might seem weird to invest in a restaurant chain and call it recession resistant. However, royalty funds are far different than investing in just how a company is performing. A great example is Boston Pizza Royalties Income Fund (TSX:BPF.UN). The company merely collects a pre-agreed percentage of revenue from its Boston Pizza locations. This stable income stream leaves investors with stable share increases and strong dividends.
The company’s first-quarter earnings report saw a 25.5% increase in sales year over year to $224.2 million, with same-restaurant sales up 25.7%. Cash flow from operations grew 38.6% to $9.2 million as well. As pandemic restrictions have eased, more revenue has flowed the company’s way, leading to more earnings as well.
Now, improvements look to continue, as the company expands its franchise locations. Shares of the stock are now up 14.33% in the last year and 5.8% in the last three months alone. Investors can also grab a hefty 7.4% dividend yield as of writing as well among their dividend stocks.
