Quick Read
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PG and JNJ have raised dividends for 70 and 64 consecutive years respectively, growing payouts through both the 2008 crisis and 2020 pandemic.
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PepsiCo leads the group with a 4.08% yield, but its 73% payout ratio and rising input costs make its cushion the thinnest of the four.
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Walmart's dividend is covered at just 34% of earnings, with free cash flow yield double its 0.76% dividend yield, giving it the strongest safety margin in the group.
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Recession-proof income comes down to two things: customers who keep buying when budgets get tight, and dividends that kept rising through the last real downturns. The four blue chips below sell groceries, soap, snacks, and medicine, and each one grew its dividend through both the financial crisis and the pandemic. Procter & Gamble has the longest track record, with its most recent fiscal year marking its 70th consecutive year of dividend increases. For readers at or near retirement, the point of this group is that the dividend keeps showing up. A big yield is secondary.
Procter & Gamble: Seven Decades of Raises
Procter & Gamble( NYSE:PG ) yields 2.67%. The quarterly dividend is $1.0885, which works out to $4.354 a year at a share price of $161.57.
Downturn record:During the financial crisis, fiscal 2009 revenue fell to $76.694 billion from $81.748 billion, yet operating income held at $16.662 billion. P&G still raised the quarterly dividend from $0.40 to $0.44. In pandemic fiscal 2020, revenue rose to $70.95 billion from $67.684 billion, and the payout went from $0.7459 to $0.7907.
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Safety read:Trailing dividends of $4.291 per share against earnings of $6.64 make for a payout ratio of about 64.6%. That leaves real room. Free cash flow last quarter came in at $4.40 billion, and operating cash flow was $5.77 billion. For fiscal 2027, management plans more than $10B in dividends and ~$5B in buybacks. It has also paid a dividend for 136 straight years.
Bull case:Tide, Pampers, Charmin, and Crest are products families run out of and replace in any economy. Last quarter, all five segments grew organically, and core EPS of $2.00 beat the $1.89 consensus.
Risk:Management expects a roughly $1.4B after-tax commodity cost headwind this fiscal year, along with a 150 bps drop in core gross margin.
Johnson & Johnson: Healthcare Demand Ignores the Business Cycle
Shares of Johnson & Johnson( NYSE:JNJ ) yield 1.92% at $273.25. This year the quarterly dividend was increased 3.1%, from $1.30 to $1.34. The company says that marked its 64th consecutive year of dividend increases.
Downturn record:Revenue fell to $61.897 billion in 2009 from $63.747 billion in 2008, and net income stayed solid at $12.266 billion. The quarterly dividend rose from $0.46 to $0.49 that year. In 2020, revenue edged up to $82.584 billion from $82.059 billion, and the payout moved from $0.95 to $1.01.
Safety read:This year's legal charges distort GAAP earnings, so free cash flow is the cleaner way to measure coverage. Management guides to $21 billion of free cash flow for the year. The annualized $5.36 dividend costs roughly $12.9 billion. J&J holds about $17 billion in cash against roughly $45 billion of debt. Raising the annual dividend is one of its stated capital-allocation priorities.
Bull case:Third-quarter sales rose 6% to $25.4 billion, and oncology grew about 17%. MedTech chief Timothy Schmid said, "The underlying procedure environment remains stable across key markets." People keep needing cancer drugs and surgery no matter the economic background.
Risk:Litigation remains a drag. The third quarter carried about $7 billion of costs linked to the proposed talc settlement and two deals, which cut quarterly net income to $210 million.
PepsiCo: Highest Yield in the Group
PepsiCo( NASDAQ:PEP ) has the biggest yield here at 4.08%, with shares at $137.34. The quarterly dividend recently went up to $1.48 from $1.4225. The dividend record shows a raise every year since 1999, when the quarterly payment was $0.13.
Downturn record:Revenue grew to $43.251 billion in 2008 from $39.474 billion and held at $43.232 billion in 2009. The dividend kept rising, from $0.375 in 2008 to $0.425 in 2009. In 2020, revenue reached $70.372 billion, up from $67.161 billion.
Safety read:The cushion is thinner here. Trailing dividends of $5.80 against EPS of $7.95 mean a payout ratio of about 73%. The free cash flow yield of 4.10% tops the dividend yield. Its debt-to-equity is 2.45, but interest coverage of 10.26x keeps the debt manageable. This year PepsiCo expects to return $8.9B to shareholders, $7.9B of it through dividends.
Bull case:Third-quarter revenue rose 5.59% to $25.27B, and adjusted EPS of $2.34 beat expectations. Organic revenue outside North America grew 8%. North American snack volumes also recovered after a price reset, and CEO Ramon Laguarta called that "a major turnaround." Smaller 100-calorie packs are designed for shoppers watching every dollar.
Risk:According to the CFO, input costs are starting to "ramp" as hedges expire. Core operating profit in the North American foods business already fell 12%.
Walmart: Small Yield, Strongest Coverage
Walmart( NASDAQ:WMT ) yields just 0.76% at $123.51. Owning it is about dividend durability more than current income. The payout keeps moving up: $0.2075 a quarter in 2024, $0.235 in 2025, and $0.2475 now.
Downturn record:For the fiscal year ended January 2009, revenue grew to $404.254 billion from $377.023 billion, and net income rose to $13.381 billion. Every quarter of that stretch was profitable. The quarterly dividend went from $0.2375 to $0.2725. During the pandemic year, revenue rose to $559.151 billion from $523.964 billion.
Safety read:Of the four, Walmart's dividend is the most well covered. The payout ratio is about 34% of earnings, and the free cash flow yield of 1.52% is 2 times the dividend yield. Net debt is just 1.28x EBITDA, and $25.1B remains on the buyback program.
Bull case:When budgets get squeezed, shoppers trade down to Walmart. CEO John Furner said, "Customers are looking for value and convenience, and they want things fast. And that's where Walmart shines." Global eCommerce grew 23%, and management raised full-year adjusted EPS guidance to $2.80 to $2.87.
Risk:A yield under 1% produces very little cash today. Retirees who need current income will get most of their payout from the other three names.
A Recession-Ready Income Bucket
Together, these four cover groceries, family basics, snacks, and healthcare- the spending people protect when money gets tight. All four raised their dividends through the 2008 crisis and the 2020 shutdowns, supported by sales that held or grew. PepsiCo provides the most yield, P&G and Johnson & Johnson provide the longest raise runs, and Walmart provides the largest coverage margin. That combination gives a retirement portfolio reliable income in any economy.
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