24 Defensive Stocks To Weather Most Economic Storms

With inflation remaining above the Fed’s target and weakening employment, the Fed is trying to steer the economy cautiously. While there are no signs of imminent recession, some economists think we’re due for one. If that is so, defensive stocks can be an excellent place to weather any market volatility.

Even if we are not headed into a recession, it’s essential to review and diversify your portfolio, primarily if you are heavily concentrated in the strong-growth tech sector dependent on AI infrastructure.  There is always some uncertainty in the stock market, causing stocks to rise and dip. 

 

A Bit About Our Economy

The economy runs on business cycles that alternate between economic growth and downturns. Our economy remains strong, though higher tariffs lead to higher prices. Recent consumer-related inflation is about 2.8%, above the 2.0% target. Investors hope that inflation will drop to more normal levels with the Fed’s actions.

The Fed has slowly reduced interest rates, which are still higher than economists prefer, and these higher rates tend to reduce consumer spending, accounting for 70% of our economy. As borrowing rates decrease, consumers will be able to buy cars and homes.

Where should stock investors invest in the current market? We think it is an excellent time to hold stocks that can withstand a potential recession. 

Defensive Stocks

We think there is always a place in your portfolio for the least volatile stocks that grow more slowly but provide dividend income. 

While we can’t stop a recession, we can improve our investment portfolio to better weather the market volatility by following these rules:

• Taking a long-term perspective of the market.
• Avoid panic-selling and become less emotional about day-to-day swings.
• Remain diversified in your portfolio.
• Consider adding defensive stocks with dividends.

Why Recession-Proof Stocks?

Nearly three-fourths of US public companies with annual sales greater than $50 million experienced a decline in revenue during the last four downturns. Yet, 14% grew revenue and profit.

Recession-proof stocks, sometimes called recession-resistant, tend to hold their value relative to the overall market during weak economies, whereas growth and cyclical stocks perform better during economic expansions. Stocks of businesses that do better in a downturn have these defensive characteristics:

• Have experienced and capable management.
• Generate stable earnings and cash flow.
• Pay consistent dividends that cushion volatility.
• Enjoy ongoing demand for their products.
• Ability to weather weakened economies or even do better in recessions.
• Have low betas below the market’s 1.0 beta, indicating relatively low volatility.

Although nothing is fully recession-proof, we believe the 25 stocks below are attractive during economic downturns, especially for conservative investors more interested in preserving capital than accumulating it. The recession-proof stocks are not an exhaustive list but represent a sampling of companies that fit.

You will often find several dividend aristocrat stocks known for dividend growth among recession-proof names. Indeed, several stocks are part of the elite dividend aristocrat group. This group comprises S&P 500 companies that have consistently increased their dividend payouts for at least 25 consecutive years, have strong financial health, reliable income, and management’s commitment to returning value to shareholders, making them attractive to income-focused investors.

Specific market sectors perform relatively better during recessions than others, including health care, consumer staples, discount retail, and utilities. We will review some sector characteristics and resilient stock picks you may want to include in your stock portfolio. 

Please note that you should always do your research or consult your financial advisor to understand each company’s fundamentals and earnings estimates.

Healthcare

The Health Care sector has pharmaceuticals, medical equipment & devices, supplies, vaccines,  biotechnology, hospitals, long-term care facilities, and research. This group experiences strong demand for ongoing medical needs that people often can’t defer, regardless of economic conditions.

Many of the companies in this group have branded health care products in our homes and other drugs or devices that we are fortunate not to need, but are life-saving.

At the top of the list are healthcare  stocks:

Abbott Labs (ABT)  Dividend Aristocrat

ABT is a medical device and health care company that manufactures and sells medical devices, pharmaceuticals, diagnostics, branded & generic medicines, and nutritional products. Its best-known products are Similac and Ensure. ABT pays a decent dividend yield of and has a beta of 0.74

Bristol Myers-Squibb (BMY) 

BMY is a top-notch global biopharmaceutical company. They manufacture and sell oncology, immunology, cardiovascular, and fibrosis products.  They are known for meds like Eliquis, a drug used to prevent blood clots, and Revlimid, an oral medication used to treat multiple myeloma. BMY shares have a dividend yield of 2.86% and a beta of 0.47.

CVS Health (CVS) 

CVS is the largest retail drugstore chain in the US and appears to have turned itself into a health company. It provides pharmacy benefits and health insurance through its Aetna acquisition. Consumers will likely continue to fill prescriptions and take care of their hygiene. According to its CEO, only 3% of its revenues are “affected by the economy.” CVS has a good dividend yield and a 0.75 beta.

 Johnson & Johnson (JNJ)  Dividend Aristocrat

JNJ is a 130+ year-old company operating three primary businesses: Consumer Health, Pharmaceutical, and Medtech. Consumer health focuses on personal health care, including skin health, beauty, OTC medicines, and wound care. They have many household products, such as Tylenol, Band-Aid, and Neutrogena, pre-spinoff of Kenvue. The stock has been robust in 2025.

JNJ is one of only two companies (i.e., Microsoft) that carry a coveted AAA credit rating. JNJ has a strong yield% and a beta of 0.66.

 Merck (MRK)

MRK, a 130-year-old company, provides health solutions through prescription medicines, vaccines, therapies, and animal health. The company is known for having blockbuster drugs. MRK has an above-average yield with a low beta of 0.38.

 Pfizer (PFE) 

Pfizer was founded in 1849 by German cousins Charles Pfizer and Charles Earhart as a manufacturer of fine chemicals in Brooklyn. They discovered citric acid, the ingredient in Coca-Cola and Pepsi. Pfizer is a focused, innovative research-based global biopharma company that manufactures more than 350 different pharmaceuticals, including Eliquis, a cardiovascular treatment; Ibrance, a cancer drug; Zeljanx, an immunology drug; and others. They are less dependent on COVID-19 drugs than in previous years. PFE shares have an above-average dividend yield, carrying a beta of 0.75.

Consumer Staples

Consumer staple companies manufacture products people need in their homes, including food, beverages, household, and personal hygiene products. It may also include alcohol and tobacco, whose addictive features often lead to continued demand when higher stress is due to job loss. During the Great Recession, alcohol sales grew more than 9% in 2008.

 Kimberly-Clark (KMB)  Dividend Aristocrat

KMB ‘s primary segment is Personal Care products, paper-based consumer products found in most households.  They manufacture and market disposable diapers, baby wipes, feminine and incontinence care, consumer tissue, and paper such as Kleenex and Scott. They have a good yield and 0.37 beta.

9. Kroger (KR) 

Founded in 1883, Kroger is the third-largest American supermarket retail chain, behind Walmart and Amazon, operating in 35 states and the District of Columbia. The company is one of the largest private employers in the US. They have a 1.54% dividend yield and a beta of 0.48.

 Coca-Cola (KO) Dividend Aristocrat

KO first distributed its soft drink, Coca-Cola, as medicine in the 1880s. The company’s beverage products include Coke in sparkling flavors, sports, coffee, and tea; as well as nutrition, dairy juice, and plant-based products. Besides Coke, notable brands are FUZE TEA, Minute Maid, and Powerade. KO has a decent dividend yield and a beta of 0.58.

 PepsiCo (PEP)  Dividend Aristocrat

PEP, the company, began in 1965, though the Pepsi beverage dates back to 1898. It is an American multinational company that manufactures and distributes convenience food and snacks. PEP’s brands are well known and include Pepsi, Frito-Lay, Cheetos, Quaker Oats, and Gatorade.

 Procter & Gamble (PG)  Dividend Aristocrat

PG provided branded consumer packaged goods in five areas: Beauty, Grooming, Health Care, Fabric & Home, Feminine & Family Care. Known for many iconic household brands, including Mr. Clean, Tide, Bounty, Head & Shoulders, and Old Spice. Its dividend yield is decent, with a beta of 0.39.

 Philip Morris International (PM) 

PM’s history goes back to a London tobacconist, Philip Morris, who had a shop selling tobacco and cigarettes in 1847. PM is an American-Swiss company that manufactures and sells cigarettes and smoke-free products. Its best-known brands are Marlboro and Chesterfield. It has a dividend yield of 5.04% and a beta of 0.67.

 Diageo PLC 

DEO is a beverage alcohol company. They are a significant spirits distributor and the world’s largest producer of Scotch Whisky. Besides Scotch Whisky, they carry Vodkas (e.g., Ketel One) and Rums (e.g., Don Julio). As PM, it is more like a sin stock than a recession-proof stock. Sin stocks are shares of companies that operate in alcohol, tobacco, gambling, cannabis, weapons, and adult entertainment. I deeply understand that many investors won’t own these stocks because of their unethical or immoral activities. 

Its dividend yield is solid, and its beta is 0.66.

Discount Retail Outlets

Discount retail stores offer merchandise at substantial discounts to price-conscious consumers seeking to save money during an economic downturn. As interest rates rise, consumer spending decreases, and consumers look for more bargains. Apparel and specialty retail are not part of this category and include recession-proof stocks such as:

15. Walmart (WMT)  Dividend Aristocrat

Sam Walton founded WMT in 1962, and it is among the most prominent American companies in terms of private employers and revenue. The company operates Walmart, its leading discount retail supercenter stores, and Sam’s Club, its membership warehouse business. WMT has a lower yield, focusing on higher growth than in previous years.

16. Costco (COST) 

COST operates membership warehouses that offer branded and unbranded household goods, groceries, and merchandise across various categories at discounted prices. COST has a lower yield than others and a beta of 0.72.

17. Dollar General (DG) 

Before changing its name to Dollar General, the company started as a family-owned business. DH is an American variety store chain known for its low-priced household merchandise and deals, similar to other dollar stores (e.g., Dollar Tree). It has a lower yield and a beta of 0.52.

18. Home Depot (HD) 

HD is the largest home improvement retailer in the US, catering to homeowners, builders, and do-it-yourself consumers engaged in home projects. Supercenters have the best assortment of tools, construction products, appliances, and services. Their shares have a solid dividend yield and a beta of 0.97. With mortgage rates coming down slowly, its growth will be stronger in the long term.

19. TJX Companies (TJX) 

TJX is an off-price apparel and home fashion retailer and includes its flagship TJ Maxx (in the US), TK Maxx (outside of the US), Marshalls, HomeGoods, and HomeSense. The company is an American department store chain that sells well-known brands at prices lower than those of other major stores. TJX shares have a solid dividend yield and a beta of 0.89.

20. Target Corp.  Dividend Aristocrat

TGT is an American big-box discount store chain selling general merchandise, including food, grocery, dairy, beverage, and frozen items, through its stores and digital channels. TGT shares have a dependable dividend yield and a beta of 0.94. This company has suffered in recent years and has been disappointing for investors. They have made some changes, but this stock is less stable than some of the others at least in the near term.

Utility Companies

Utilities include water, gas, and electric companies that offer services with consistent demand across economies and have long been considered recession-proof stocks. These companies have been focusing on electric grid renovation and data centers to prepare for the AI infrastructure.  Waste collection companies have similar utility-like traits.  Historically, telecom companies were part of this sector, but they are less so now that they have diversified into other businesses, notably media.

 American Water Works (AWK) 

AWK is an American public utility founded in 1886, but did not have its IPO and NYSE listing until 2008. The company is a water and wastewater utility, owning utilities that provide water to residential, commercial, and industrial customers, as well as to public authorities and fire services. Its dividend yield is attractive, and it has a beta of 0.46.

 Brookfield Infrastructure 

BIPC has a diversified portfolio of infrastructure assets, including utilities, transportation, energy, pipelines, power lines, data centers, and cell towers, with a global network. Its shares have an above-average dividend yield and a beta of 0.75.

Duke Energy (DUK) 

DUK is an energy company with electric utilities and infrastructure, natural gas utilities, and commercial renewables operating in several Southeast states. They provide retail electric service through the generation, transmission, and sale of electricity. DUK shares yield above average and have a beta of 0.33. NextEra Energy(NEE)  Dividend Aristocrat

NEE is an electric power and energy infrastructure, and is working on data centers. It operates independent and renewable energy through subsidiaries, including its most significant sub, FPL (Florida Power & Light), which provides rate-regulated electricity in parts of Florida and Gulf Power. Its NEER subsidiary operates in wholesale electricity markets.

Waste Management 

WM provides waste management environmental services in North America. Services include collection, transfer, disposal, recycling, and resource recovery. WM shares have a dividend yield of around an attractive yield and a beta of 0.80.