The last recession which started in 2007 and ended in 2009 was a tough one. Many investors got severely burned by having a portfolio of high risk assets. Which of course is great in a positive economic environment but which could cause severe stress once the cycle turns. In the following article, you will learn about 3 companies that had positive sales growth, earnings growth, positive free cash flow and they either maintained or increased their dividend during the recession.
A positive free cash flow is highly important because that’s the pile of cash a company can use to strengthen their business. This can be used to either invest in new assets, increase cash in hand or pay dividend to shareholders. When a company can maintain or increase their dividend even under financial stressed periods such as the last recession, it shows a sign that management is conservative with their money and they operate in a shareholder-friendly way.
Stable or few changes in both sales growth and earnings growth earnings growth is a sign that the company has a durable pipeline which is somewhat recession resistant. It’s common to find consumer staples, consumer discretionary or healthcare in this group, as their pipeline is a necessity no matter what.
Abbot Laboratories (NYSE: ABBOT)
With a market capital close to $110 billion, Abbot Laboratories is a major player in the healthcare segment. They both discover, manufacture and sell healthcare related products around the globe. Abbot’s pipeline consists of the following segments: Pharmaceutical, Diagnostic, Nutritional, Cardiovascular and Neuromodulation and even blood monitoring systems. Abbot’s pipeline is grand and a necessity for people no matter what.
During the last recession, Abbot’s revenue increased by 3.9% which is a clear sign of a strong company. Further, the stock was only down 13% while the S&P500 was down as much as 55%.
Comcast (NYSE: CMCSA)
The cable and satellite business has rewarded shareholders for a long time and companies such as AT&T (NYSE: T) and Verizon (NYSE: VZ) are frequently to be seen in dividend income portfolios. However, Comcast, with a market cap at around $150 billion is often neglected. The company grew its revenue by 3.4% during the recession, and they have even paid uninterrupted dividend for more than 9 years now.
However, investors looking for a conservative investment might look elsewhere as Comcast returned about the same as the s&p500, and this might be reason for investors’ lack of love for this boring yet stable company.
C. R. Bard (NYSE: BCR)
Another healthcare company which could increase their revenue by about 3.5% during the financial crisis was C. R. Bard. The company is far smaller than its competitor Abbot with only $25 billion in market cap. However, often the best returns can be found were most investors aren’t looking.
C. R. Bard is truly a gem. They have paid uninterrupted dividends from more than 25 years and gave investors a nice hedge in between 2007 to 2009 by only dropping 18% while the S&P500 was down 55%. Further, C. R. Bard has returned a total annual return at 14.1% since 2008 which clearly is a sign that this company is something worth considering.
In total, all companies fit in a portfolio that focuses on equities with low risk but still have growth that is acceptable shareholder returns. Investors would do wise to do some further due diligence.
Disclaimer: The author own no shares in ABBOT, CMC or BCR