Desiring Durable Passive Income During an Economic Downturn? These Elite Dividend Stocks Have Hiked Their Payouts In Each of the Last 4 Recessions.

Globe and Mail

15-04-2025

Economic forecasters are raising the odds that we could experience a recession in the coming quarters. Goldman Sachs has hiked its recession probability a few times in recent weeks, bumping it from 20% all the way to 45%. Meanwhile, JPMorgan is even more bearish. Its recession model sees a nearly 80% chance the economy goes into a recession, up from 60% not long ago.
Recessions tend to cause corporate profits to decline, which drives many companies to cut costs through layoffs and other initiatives. Some companies will even cut or suspend their dividend payments to shareholders to conserve cash.
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However, other companies are more recession-resistant due to the durability of their cash flows and the strength of their balance sheets. ExxonMobil (NYSE: XOM) and Coca-Cola (NYSE: KO) have proven their ability to weather recessions over the decades. They've both increased their dividends throughout at least the past four recessions. There's a good chance they can withstand the next one with similar ease.
XOM Dividend data by YCharts. Gray bars are recessions.
Decades of dividend growth with more to come
ExxonMobil hiked its dividend payment by 4% earlier this year, extending its streak to 42 years of annual payment increases. "We're proud of the fact that we've increased our annual dividend per share for 42 years in a row, something only 4% of S&P 500 companies can claim," stated CFO Kathy Mikells during the oil giant's fourth-quarter earnings conference call. She continued, "And we plan for that track record to continue for decades to come, which is only possible by investing in the high-quality growth opportunities that drive leading returns and higher cash flows."
The energy company has been investing heavily in transforming its business to dramatically improve its underlying earnings power while also expanding into lower-carbon energy. This strategy has boosted its earnings capacity by nearly $14 billion over the past five years on a constant price and margin basis. Exxon plans to invest over $140 billion into major capital projects and its Permian Basin development program through 2030, which, along with structural cost savings, should add another $20 billion to its annual earnings capacity.
That incremental income will give Exxon even more fuel to grow its dividend, which is already on an incredibly safe foundation. Last year,Exxon produced $34.4 billion in free cash flow, easily covering its $16.7 billion dividend outlay. Meanwhile, it has a fortress balance sheet with an ultra-low 6% leverage ratio and a massive $23.2 billion cash balance. These factors put the oil giant's 3.8%-yielding dividend on a rock-solid foundation that should continue withstanding recessions.
Cashing in on durable demand for its beverages
Coca-Cola boosted its dividend payment by 5.2% earlier this year. That extended its dividend growth streak to 63 straight years. That raise kept Coca-Cola in the ultra-elite group of Dividend Kings, companies with 50 or more years of annual dividend increases.
The company has benefited from the durable and growing demand for its beverage brands. Its portfolio features multiple billion-dollar brands that generate lots of free cash flow for the company. Coca-Cola expects to produce $9.5 billion in free cash flow this year, more than enough to cover its dividend outlay ($8.4 billion last year). The company also has a strong cash-rich balance sheet ($12.9 billion of cash, cash equivalents, and short-term investments) with leverage at the low end of its target range.
Coca-Cola's long-term target is to organically grow its revenue by 4%-6% annually, which should drive mid-to-high single-digit earnings-per-share growth. Meanwhile, the company can enhance its growth rate by making accretive acquisitions. That puts it in a strong position to continue increasing its 2.9%-yielding dividend.
Recession-resilient dividends
Exxon and Coca-Cola have increased their dividends every year for several decades, which includes the last four recessions.They're in excellent positions to continue raising their payout during the next downturn, whether that happens later this year or further in the future. Because of that, they're great dividend stocks to buy for a durable passive income stream.
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