Investing

15 Top Defensive Stocks for the Next Recession at Sky-High Valuations

Clorox
> Times Earnings: 24.0
> Dividend Yield: 2.6%
> Market Cap: $19.9 billion

Clorox Co. (NYSE: CLX) makes household and consumer products with much more than just bleach and cleaning brands that every consumer uses or has used. The field is tight with competition here, and at a time when earnings compress, companies seeking to divest or make changes to their portfolio might also come with higher in-store promotional activities, when the company may face online sales competition and private label competition. Clorox is currently at the top of its P/E range of 215 to 25 over the past seven years.

Coca-Cola
> Times Earnings: 24.5
> Dividend Yield: 3.0%
> Market Cap: $228.5 billion

Coca-Cola Co. (NYSE: KO) was considered dead money from 2012 through 2018, but it has migrated away from sugar-water into many more beverages in water and sports drinks and has taken on better growth partnership opportunities. Coca-Cola has staged a technical breakout above $50, and the analyst community has been raising price targets. That comes with a serious premium to the market for a low-growth company. Coca-Cola used to trade closer to 10 times earnings after the recession, but it’s a serious premium now that the company isn’t under as much fire.

Colgate-Palmolive
> Times Earnings: 25.0
> Dividend Yield: 2.4%
> Market Cap: $62.4 billion

Colgate-Palmolive Co. (NYSE: CL) has many consumer brands and products beyond its namesake toothpaste and soap offerings. The consumer products segment remains highly defensive during weaker times in the markets, but it is highly competitive with promotional expenses and more private label and online sales. The multiple of 25 times expected earnings is not the highest it has ever been, but it’s a 40% premium versus some prior years, and it actually has the lowest dividend yield compared with its top three consumer products peers.

Crown Castle
> Times Earnings: 71.0
> Dividend Yield: 3.1%
> Market Cap: $60.5 billion

Crown Castle International Corp. (NYSE: CCI) is in the same boat as American Tower as it converted to a REIT status and it has a highly protected market and no serious trade issues. Yet, its earnings multiple and its higher dividend are harder to understand in basic investor screens. Much of the premium here may be that its shares have outperformed its rival, but it’s still a serious premium for anything tied to telecom and wireless.

Domino’s
> Times Earnings: 23.0
> Dividend Yield: 1.1%
> Market Cap: $9.5 billion

Domino’s Pizza Inc. (NYSE: DPZ) may not sound extremely high on a P/E ratio basis today, but its stock has lost one-fourth of its value from the peak. It’s also a high-value stock in a food delivery business, where the options of who delivers, what food types can be delivered and how they are delivered seem to be getting very crowded. It also has a network of over 16,000 stores and is said to be in 85 nations and territories, and it already has expanded its menu alternatives and has converted to almost an entirely franchise model at this stage. If Domino’s can’t sustain its earnings growth ahead, it’s going to have to share more of its income via dividends to keep shareholders hungry for more.

Keurig Dr. Pepper
> Times Earnings: 21.5
> Dividend Yield: 2.2%
> Market Cap: $39.2 billion

Keurig Dr Pepper Inc. (NYSE: KDP) is new to the defensive screen, and it still has a high enough growth profile that some investors won’t shy away from it. Its shares also have not seen a mad scramble with big inflows. It is the culmination of Dr Pepper, Snapple and Keurig in coffee and tea technology. That said, its dividend is handily lower than rivals Coca-Cola and PepsiCo.