3 Dividend Stocks That Can Help You Sleep Better in a Bear Market

The stock market has been rather turbulent so far in 2022, and there’s no sign of this volatility going away anytime soon. This means many investors are understandably reluctant to add any new stocks to their portfolio.

However, there are some stocks that could still be an excellent fit in an uncertain market. Businesses that sell things people need tend to hold up well, and it’s a good sign when a company has a long, consistent track record of paying and raising dividends, just to name a couple of things to look for.

Here are three in particular that can provide stable income with recession-resistant businesses, and that also have excellent growth potential over the long run.

A Dividend Aristocrat with a track record of outperformance

Realty Income (O -0.52%) might just be the ultimate “sleep well at night” stock.

If you aren’t familiar with the business, Realty Income is a real estate investment trust, or REIT, that owns more than 11,700 properties. Virtually the whole portfolio is freestanding properties (single tenant), and about 80% of the tenants are retail in nature. There are smaller concentrations of industrial, agricultural, and gaming real estate, but this is primarily a retail REIT.

First off, Realty Income’s tenants are mostly recession resistant and also resistant to e-commerce disruption. Drugstores, dollar stores, warehouse clubs, and shipping businesses are a few examples. All of its tenants sign long-term triple net leases, which make the tenants responsible for taxes, insurance, and maintenance. All Realty Income has to do is buy properties with top-quality tenants and enjoy years of predictable, growing income.

The proof is in the numbers. Realty Income has made more than 600 consecutive monthly dividend payments and has increased its dividend more than 100 times since listing on the NYSE in 1994. The stock has handily outperformed the total returns of the S&P 500 throughout its 28-year publicly traded history and pays a 4.6% dividend yield in monthly installments.

An evergreen business with lots of room to grow

Healthcare is one of the most recession-proof industries, and businesses that provide healthcare products and services like Walgreens Boots Alliance (WBA 7.85%) should do just fine, even in a deep recession.

To be sure, there are some short-term headwinds. For example, Walgreens’ revenue dropped 30% year over year in the latest quarter, primarily due to lower COVID-19 vaccination volume. There is increasing competition from companies like Walmart and Amazon.

However, this is a very profitable business, with a stable core and lots of room to run. People need prescriptions and healthcare items no matter what the economy is doing. And Walgreens is gradually building out healthcare services within its stores, which could become a big long-tailed driver of growth.

Considering its resilient nature and the long-term potential of its in-store healthcare business, Walgreens looks like an incredibly cheap stock right now at just 8 times trailing-12-month earnings and with a well-covered 4.8% dividend yield.

Perhaps the most recession-resistant type of real estate

It’s tough to make the case that any type of commercial real estate is more recession proof than medical offices. Not only do medical office tenants sign long-term leases, but these businesses are in demand no matter what the economy is doing.

Physicians Realty Trust (DOC -1.05%) invests in a portfolio of healthcare properties, most of which are medical office buildings that are either located on major health campuses or affiliated with large health systems. The company owns 290 properties, and 95% of its space is currently leased.

There’s also quite a bit of long-term growth potential. With the gradual aging of the massive baby boomer generation, the need for healthcare services is likely to steadily increase for decades. Plus, there’s a clear trend toward outpatient procedures as opposed to in-hospital. Physicians Realty Trust pays an attractive 6.3% dividend yield and has lots of upside potential over the long term.

Buy for the long term

To be perfectly clear, I have absolutely no idea what any of these stocks are going to do over the next few weeks or months, and I fully expect all three to be a little volatile for as long as the uncertainty in the economy persists. But all three of these are stable businesses that should perform just fine no matter what the economy does, and all of them are capable of market-beating returns in your portfolio.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Matthew Frankel, CFP® has positions in Amazon and Realty Income. The Motley Fool has positions in and recommends Amazon and Walmart Inc. The Motley Fool recommends Physicians Realty Trust. The Motley Fool has a disclosure policy.

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