3 defensive dividend stocks guaranteed to protect you from recession

Because of the high probability that the economy will fall into recession early next year, a focus on stocks that are not subject to the economic cycle is in order. The following trio of dividend stocks could form the foundation of a portfolio and make it more recession-proof.

Procter & Gamble $PG-0.8%

Since its founding in 1837, Procter & Gamble has become one of the world's largest consumer goods companies, with annual sales in excess of $80 billion. It operates a number of leading brands, including more than 20 that each generate north of $1 billion in annual global sales, such as Tide laundry detergent, Charmin toilet paper, Pantene shampoo and Pampers diapers. P&G sold its last remaining food brand, Pringles, to Kellogg in calendar year 2012. Sales outside the U.S. represent approximately 55% of the company's consolidated total, with approximately one-third coming from emerging markets.

Procter & Gamble has been paying dividends to shareholders for 132 years and has increased its payout for 66 of those years. P&G's dividend yield is currently 2.43% and with a payout ratio of 62%, the company is still in a safe area. It also has plenty of room for future growth, as evidenced by this April's 5% dividend increase.

Procter & Gamble itself is considered a "safe" stock that is well suited for recessionary times, as its products are definitely in the necessities and not luxury camp. Despite inflation and rising energy costs, P&G's organic sales rose 7% in its fiscal first quarter, which ended in September.

Coca-Cola $KO

Atlanta-basedCoca-Cola, founded in 1886, is the world's largest soft drink company with a strong portfolio of 200 brands covering key categories including carbonated soft drinks, water, sports, energy, juice and coffee. Together with bottlers and distribution partners, the company sells finished beverage products with Coca-Cola and licensed brands through retailers and foodservice outlets in more than 200 countries and regions around the world. Coca-Cola generates approximately two-thirds of its total sales overseas, with a significant portion coming from emerging economies in Latin America and Asia.

Because Coke does one thing and does it well - it makes refreshing beverages around the world - it is instantly recognizable and trusted by consumers. Yet it has managed to keep up with the times, cutting back on sugar consumption while expanding into bottled water, tea, juice, sports drinks and more to meet evolving consumer tastes. As a result, it is an extremely profitable business with gross, operating and net margins that far outstrip the competition, helping it generate a significant amount of surplus free cash flow.

This has allowed the company to pay a dividend every quarter for 60 years and increase it every year as well. It currently yields a solid 2.82% annually. As a dividend king, or a stock that has increased its dividend every year for more than 50 years, Coca-Cola is a worthy addition to your portfolio.

Hormel Foods $HRL+0.1%

Hormel Foods is a branded food company focused on protein. Its brands include Hormel, Spam, Jennie-O, Dinty Moore, Applegate, Wholly Guacamole, Planters and Skippy. The vast majority of the company's revenue comes from the US: 64% US retail, 28% US foodservice and 8% international. By product type, in fiscal 2021, 23% of revenues were durable foods, 18% were poultry (branded and commodity), 55% were other perishables, and 3% were other, primarily nutritional products. The Company is the number one market leader in perishable meats, shelf-stable prepared foods, pepperoni, natural/bio deli meats, and guacamole, and the number two market leader in turkey, bacon, refrigerated prepared foods, and peanut butter.

Hormel has been around for more than 130 years, so it has been through recessions and depressions, world wars, global pandemics and natural disasters. It is a time-tested business that is able to adapt its operations to changing conditions.

HRL reported a 5% year-over-year decline in sales to $3.28 billion in the fourth quarter of FY22, missing consensus of $3.38 billion. Net sales for refrigerated foods were down 7% year-over-year, grocery products were up 3%, Jennie-O Turkey Store was down 15%, and international and other sales were down 2%.

However, the slight year-over-year decline in sales did not deter the company from announcing its 57th annual payout increase. The latest increase represented a 6% increase over the previous payout. The stock now offers a dividend yield of 2.24%.

Source: the Fool, Yahoo Finance, Seeking Alpha, Everything money, Pginvestor

DISCLAIMER: All information provided here is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.