3 Stocks That Raised Their Dividends During Each of the Last 3 Recessions

The economy doesn’t always grow. Recessions occur when the economy contracts, which can have real consequences for consumers, businesses, and the stock market. Despite the recession rumors that abound in the media, no one knows when the next recession will occur or how severe it will be. Investors can prepare their portfolios by looking for stocks with a proven track record of long-term growth.

Dividend stocks are ideal for this. Companies that have increased their dividends for the past 25 consecutive years have done well enough to continue paying out more dividends to shareholders through recessions following the dot-com bubble, the financial crisis, and the peak of the COVID-19 pandemic.

Only quality companies with sustainable competitive advantages, prudent management teams and sound fundamentals can achieve this.

Here are three stocks from this group that investors can count on in good times and bad.

1. RTX

Some industries may slow down when the economy struggles, but defense and aerospace rarely stop moving. RTX (RTX -0.58%) RTX is a leader in both sectors. The company was formed after a recent merger, combining Raytheon and United Technologies and creating a three-headed conglomerate. RTX’s core business includes building aerospace systems for private and military applications, jet engines for commercial and military aviation, and various defense and weapons systems for the military. Big mergers sometimes backfire, but RTX remains in good financial health with an investment-grade credit rating.

RTX has a 31-year dividend growth streak that should continue for years to come. RTX will pay $2.52 per share in dividends this year, less than half of the $5.44 that analysts estimate the company will earn. What’s more, those earnings are expected to grow by more than 10% annually over the next three to five years. Investors can enjoy a solid 2.1% initial yield and reasonably expect double-digit increases.

Remember, defense and aviation are highly regulated industries with constant demand. The COVID-19 pandemic was an unprecedented event that brought the aviation industry to a near standstill. This is the only time in decades that RTX’s annual revenue has fallen by 15% or more. And yet, RTX still raised its dividend. Investors can feel confident owning this diversified dividend stock with long-term growth potential.

2. Sherwin-Williams

Paints and coatings are remarkably simple products that generate recurring sales in new construction, home construction and renovations. Sherwin-Williams (SHW 0.74%) Sherwin-Williams is the industry leader and a dividend star with a 46-year streak of active dividend growth. Paint doesn’t have much exclusivity, but Sherwin-Williams has a strong brand that resonates with DIYers and building professionals. Sherwin-Williams sells its products through company-owned stores, retail stores and distributors. It’s a boring business, but it has staying power; paints and coatings will probably never become obsolete.

Investors won’t find a huge starting yield here; Sherwin-Williams yields just 0.8%. However, the rapid appreciation in the stock price helps make up for that shortfall. The stock has surpassed the S&P 500 over the past decade. The dividend is only a quarter of the company’s estimated 2024 earnings, so there is plenty of room for future dividend increases that will easily outpace inflation.

Sherwin-Williams is a very consistent company: its annual revenue has only fallen more than 10% once since the early 1990s. Growth investors should consider Sherwin-Williams as a dynamic company with the potential to significantly increase its dividend over the next decade and beyond.

3. NextEra Energy

Renewable energy has been growing steadily for decades and a leading renewable energy company NextEra Energy (NEE 0.84%) NextEra has been a big winner. It operates wind and solar power products, energy storage systems, and the largest U.S. electricity provider, Florida Power & Light. The company issues debt and equity to finance its energy projects, but management generates enough investment returns to turn a profit and pay dividends to investors. NextEra’s growth and dividends have generated overwhelming total stock returns since the 1980s, despite its share price doubling.

The company has raised its dividend for 31 consecutive years. Investors will receive $2.06 this year for each share they own, or about 65% of NextEra’s expected earnings per share. Investors shouldn’t worry about management continuing to cut those dividend checks; NextEra’s utility business is virtually recession-proof because people still need electricity and renewable energy is only getting bigger.

Today, wind and solar power contribute just 13% of total U.S. electricity generation, but that number is poised to increase. This surge will impact every company in the renewable energy sector, but NextEra’s title as the world’s largest producer all but guarantees that the company will continue to grow for years to come.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends NextEra Energy. The Motley Fool recommends RTX and Sherwin-Williams. The Motley Fool has a disclosure policy.