2 Stocks That Can Protect Your Portfolio From a Recession

Lingering macro headwinds continue to mar the U.S. economy’s growth. Moreover, according to renowned investor Michael Burry, the U.S. economy will likely enter a recession this year. In addition, according to Bankrate's Fourth-Quarter Economic Indicator poll, the U.S. economy has a 64% chance of contracting in 2023.

Scott Anderson, chief economist and senior vice president at Bank of the West, said, "The amount of monetary tightening necessary to rebalance the labor market and bring inflation down to target will likely require at least a mild recession by historical standards."

Also, with surging recession fears, the job market is expected to have already started to cool down. The unemployment rate is expected to cross 4.5% in 2023. Payroll growth decelerated in December, with nonfarm payrolls increasing by 223,000 for the month, marking a slight decrease from the 256,000 gain in November.

Therefore, quality dividend-paying stocks Pfizer Inc. (PFE) and Walmart Inc. (WMT) could be ideal buys now to navigate a recessionary environment.

Pfizer Inc. (PFE)

PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas.

On December 21, 2022, PFE announced that the U.S. Food and Drug Administration (FDA) has accepted for review a New Drug Application (NDA) for etrasimod for individuals living with moderately-to-severely active ulcerative colitis, marking yet another milestone achievement for the company.

PFE has paid dividends for 33 consecutive years. Its dividend payouts have increased at 5.7% CAGR for the past five years. Its current dividend yield is 3.22%, while its four-year average yield is 3.63%.

For its third quarter ended October 2, 2022, PFE's United States segment revenues came in at $13.85 billion, up 97.3% year-over-year. Its non-GAAP net income came in at $10.17 billion, up 39.7% year-over-year. Also, its non-GAAP EPS came in at $1.78, up 40.2% year-over-year.

PFE's revenue is expected to increase 2.2% year-over-year to $24.37 billion for the yet-to-reported quarter ended December 2022. Its EPS is expected to increase marginally per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 2.4% to close the last trading session at $50.92.

PFE's POWR Ratings reflect its promising outlook. It has an overall A rating representing a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

PFE has an A grade for Value and a B for Growth, Sentiment, and Quality. It is ranked #2 out of 163 stocks in the Medical – Pharmaceuticals industry. Click here for additional PFE ratings (Momentum and Stability).

Walmart Inc. (WMT)

WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.

As of January 5, 2023, WMT successfully operates 36 drone delivery hubs across seven states, including Arizona, Arkansas, Florida, North Carolina, Texas, Utah, and Virginia.

Vik Gopalakrishnan, vice president of innovation & automation at WMT, said, "We're encouraged by the positive response from customers and look forward to making even more progress in 2023."

WMT has paid dividends for 49 consecutive years. Its current dividend yield is 1.53%, and its four-year average yield is 1.69%.

WMT's total revenues came in at $152.81 billion for the third quarter that ended October 31, 2022, up 8.7% year-over-year. Also, its net sales came in at $151.47 billion, up 8.8% year-over-year. Its adjusted EPS came in at $1.50, up 3.4% year-over-year.

For 2023, WMT's revenue is expected to increase 5.8% year-over-year to $605.99 billion. Its EPS is expected to increase by 4.3% per annum for the next five years. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 17.3% over the past six months to close the last trading session at $146.78.

WMT has an overall A rating, equating to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Sentiment and a B for Stability. 

WMT is ranked #8 out of 39 stocks in the Grocery/Big Box Retailers industry. To see additional POWR Ratings for WMT (Growth, Value, Momentum, and Quality), click here.

PFE shares were trading at $49.59 per share on Monday afternoon, down $1.33 (-2.61%). Year-to-date, PFE has declined -3.22%, versus a 2.82% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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