There’s a lot of uncertainty about what’s ahead for the economy and stock market. We could experience an economic downturn this year as rising interest rates to combat inflation begin to impact the economy. That could send stock prices even lower, making it hard to know where to invest.
However, some companies are relatively recession-proof. Three resilient companies that should keep growing in 2023 and beyond are NextEra Energy (NEE 1.23%), Realty Income (O 1.09%), and WM (WM 3.65%). Because of that, you can confidently add them to your portfolio. If you have $1,500 to invest, you could buy $500 of each stock and build a diversified and durable portfolio that should weather whatever comes in 2023.
1. Powerful growth ahead
NextEra Energy is one of the country’s largest utilities. Demand for the electricity and natural gas it distributes tends to be very steady even during a recession. Meanwhile, it enjoys stable pricing from government-regulated rate structures and long-term contracts. As a result, it generates a very steady cash flow, which helps support its 2%-yielding dividend.
The company has lots of visible growth ahead, driven by rising demand for clean energy. It’s investing $85 billion to $95 billion over the next few years to expand its Florida utility, develop more renewable energy capacity, and build more electric and gas transmission infrastructure. These investments should grow its adjusted earnings per share by 10% per year through 2025 at the high end of its outlook. Meanwhile, it should support about 10% annual dividend growth through 2024.
That combination of dividend income and earnings growth should help increase shareholder value in the coming years. That income and upside make NextEra a great stock to buy and hold despite the current economic uncertainty.
2. Built with durability in mind
Realty Income is one of the largest real estate investment trusts (REITs). It aims to supply investors with stable and growing dividend income. The REIT has increased its payout for the last 101 consecutive quarters.
Realty Income has delivered such resilient income by constructing a real estate portfolio built to withstand economic downturns. The REIT gets 92% of its rental income from tenants resilient to economic downturns or isolated from the pressures of e-commerce, like grocery stores, warehouses, pharmacies, and convenience stores. It also leases these properties under triple-net structures that make the tenant cover maintenance, building insurance, and real estate taxes. These features enable Realty Income to generate very stable income to support its 4.6%-yielding dividend.
That payout should continue rising. A big growth driver for the REIT is acquisitions. It recently agreed to acquire another 185 single-tenant retail and industrial properties from CIM Real Estate Finance Trust for $894 million. The transaction will be immediately accretive to its earnings, giving Realty Income more cash flow to pay dividends. Meanwhile, with one of the strongest financial profiles in the REIT sector, Realty Income has the flexibility to continue acquiring income-producing real estate that should help grow its earnings and dividend.
3. Cashing in on steady trash demand
WM is one of the country’s largest collection, recycling, and disposal services companies. Demand for these services also tends to be relatively recession-resistant. Because of that, WM produces stable cash flow.
That gives it money to pay a growing dividend, repurchase shares, and make value-enhancing investments. The company recently increased its 1.7%-yielding dividend by 7.7%, marking its 12th straight year of dividend increases. It also approved a new $1.5 billion share repurchase authorization.
Meanwhile, the company continues to make growth-focused investments as opportunities arise. It’s currently investing $825 million through 2025 to increase its renewable natural gas production capacity. This investment will enable it to produce enough gas from landfills to power its entire fleet, reducing emissions and costs. The company is also investing to increase its recycling capabilities and steadily acquiring small waste collection companies. These investments should help grow its stable earnings so it can continue repurchasing shares and increasing the dividend.
Invest with confidence in 2023
The current economic uncertainty might make it hard to invest these days. However, given their relative immunity to a recession, NextEra Energy, Realty Income, and Waste Management should continue growing their earnings and dividends this year. Because of that, you can confidently invest in these stocks since they should be able to continue increasing shareholder value no matter what happens with the economy.
Matthew DiLallo has positions in NextEra Energy, Realty Income, and Waste Management. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Waste Management. The Motley Fool has a disclosure policy.