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3 Safest Stocks on the Planet to Buy and Hold Forever

As the 2022 bear market takes a bite out of portfolios, investors are beginning to focus more on safety and stocks that can make it through a recession.

An investor's strategy in a recession is typically to focus on stocks that have less sensitivity to economic weakness. These businesses usually have some characteristic (usually the sale of non-discretionary goods and services) that will help them thrive even in down markets.

Image source: Getty Images.

1. Realty Income leases space to defensive businesses

Realty Income (NYSE: O) is one of the safest real estate investment trusts (REITs) out there. The company specializes in single-tenant properties that are leased to high-quality tenants under arrangements where the tenant absorbs most of the costs of operating the property, including taxes, maintenance, and insurance.

These leases generally last for seven to 10 years and contain automatic escalators. For this sort of commitment to make sense, the REIT chooses companies that can perform well during all phases of the economic cycle.

Realty Income's typical tenant is a drugstore, dollar store, or convenience store. These are highly defensive businesses, meaning they are less sensitive to the overall economy. If the economy goes into a recession, people will still buy candy, toothpaste, deodorant, and the like.

During the pandemic, most REITs were forced to cut their dividends. Realty Income hiked its payout three times in 2020. The company's history of dividend increases makes it one of the original Dividend Aristocrats. At current levels, the stock yields 4.3% and is down only a little more than 3% year to date, outperforming the broader indexes.

2. Duke Energy: Even in down markets, people need electricity

Duke Energy (NYSE: DUK) is a public utility based in the Southeastern U.S. Historically, public utilities were ultra-safe stocks (at least before Enron), and most still are.

Public utilities are regulated by the states in which they provide service, and they answer to a utilities commission, which generally consists of consumer advocates who try to limit how much the utility charges for service. While this might initially appear to be a negative, the plus side is that the public utility commission knows that if it drives too hard a bargain, the utility could see a downgrade by the various ratings agencies, which would raise the cost of borrowing. This would cause the utility to cut back on maintenance, which ends up costing more down the road. The pubic utility commission wants to see the utility earn a fair return: not too much, not too little.

So far this year, Duke Energy stock is unchanged versus a big decline in the S&P 500. This makes sense given that it can pass on commodity-related price increases to ratepayers, and regardless of the state of the economy, people will still need electricity. Utilities are generally good-yielding stocks as well. At current levels, Duke shares yield 3.9%.

3. Procter & Gamble offers security in staples

Procter & Gamble (NYSE: PG) is one of the premier consumer products companies in the U.S. It owns a portfolio of brands that are staples in most Americans' lives: laundry detergent, toothpaste, razors, diapers, and deodorant, among other things.

Procter & Gamble is known primarily as a defensive name, which means it will hold up better than most companies in a recession. Consumers will still buy goods like laundry detergent and toothpaste regardless of the state of the economy.

Procter & Gamble is one of those stocks that can add stability in a bear market. The company has outperformed the stock indexes this year and is down only 13% or so. At current levels, it has a yield of 2.8%.

10 stocks we like better than Realty Income
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*Stock Advisor returns as of June 2, 2022

Brent Nyitray, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Duke Energy. The Motley Fool has a disclosure policy.


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