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3 Dividend Stocks To Protect Your Portfolio From a Recession

The Federal Reserve’s aggressive interest rate hikes have fostered recession fears and significant volatility in the stock market. Therefore, investors can consider adding dividend-paying stocks American International Group (AIG), NRG Energy (NRG), and WEC Energy Group (WEC) to their portfolio to ensure a steady income stream. Read on…

Earlier this month, the Federal Reserve hiked the benchmark interest rates by 75 basis points, its most aggressive hike since 1994. Experts expect the central bank to raise rates significantly in the next couple of months. A tighter monetary policy to curb the multi-decade high inflation has led to investors’ concerns over the economy slipping into a recession.

Amidst rising recessionary concerns and consequent market slump, investing in fundamentally strong dividend-paying stocks could help cushion one’s portfolio with a steady income stream.

Investors looking to weather the market uncertainty can look to add fundamentally strong dividend-paying stocks American International Group, Inc. (AIG), NRG Energy, Inc. (NRG), and WEC Energy Group Inc. (WEC) to their portfolios.

American International Group, Inc. (AIG)

AIG is an insurance company that offers a wide range of property-casualty insurance, life insurance, retirement security solutions, and other financial services to businesses and individuals. It operates through three segments: General Insurance, Life and Retirement, and Other Operations.

On May 4, the company was named among the Top 50 Companies for Diversity by DiversityInc for the fifth consecutive year. This reflects AIG’s commitment and heightened efforts to advance diversity among its peers.

On April 14, AIG launched Power Index 5 NY, a 5-year annuity index that blends enhanced flexibility and guaranteed growth. With a high inflationary environment, the company might experience a strong consumer response to this new offering in New York.

AIG's forward annual dividend of $1.28 yields 2.43% on the current price. This compares to its four-year average dividend yield of 2.90%.

In the fiscal first quarter (ended March 31, 2022), AIG’s pre-tax income from continuing operations increased 23.4% from the year-ago value to $5.80 billion, while adjusted net income grew 16.4% year-over-year to $1.07 billion. Its adjusted net income per share came in at $1.30, representing a 23.8% year-over-year improvement.

The consensus EPS estimate of $6.35 for fiscal 2023 (ending December 2023) represents an increase of 21.5% year-over-year. The consensus revenue estimate of $47.99 billion for the current year indicates a 228.4% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 9.5% to close the last trading session at $52.77.

AIG’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

It also has a B grade for Growth, Value, and Momentum. Among the 55 stocks in the Insurance – Property & Casualty industry, it is ranked #12.

Click here to see the POWR ratings of AIG for Stability, Sentiment, and Quality.

NRG Energy, Inc. (NRG)

NRG is engaged in producing and selling energy and related products and services. The company sells power, natural gas, home, and power services; and develops sustainable solutions under six brands: NRG, Reliant, Direct Energy, Green Mountain Energy, Stream, and XOOM Energy.

NRG pays an annual dividend of $1.40, yielding 3.65% on the current price. Its four-year average dividend yield is 1.87%

NRG’s operating income increased 4,430.4% year-over-year to $2.43 billion in the first quarter ended March 31, 2022. Its net income grew 2,217.1% year-over-year to $1.74 billion, while its net income per share rose 2,272.7% from the prior-year quarter to $7.17.

For the fiscal 2022 third quarter (ending September 2022), NRG’s revenue is expected to increase 41.2% from the prior-year period to $9.33 billion. The Street expects its EPS to increase 7.1% year-over-year to $1.39 in the same quarter. NRG has surpassed the consensus EPS estimates in three of the trailing four quarters.

The stock has gained 5.1% over the past three months to close the last trading session at $38.32.

NRG’s strong fundamentals are reflected in its POWR Ratings. It has an A grade for Value and a B for Momentum. The stock is ranked #11 of 67 stocks in the Utilities – Domestic industry.

Click here to see the other ratings of NRG for Growth, Stability, Sentiment, and Quality.

WEC Energy Group Inc. (WEC)

WEC provides regulated natural gas, electricity, and renewable and non-regulated renewable energy. The company operates through six segments: Wisconsin, Illinois, Other States, Electric Transmission, Non-Utility Energy Infrastructure, and Corporate and Other.

WEC’s forward annual dividend of $2.91 yields 3% on the current price. Its four-year average dividend yield is 2.82%

During the fiscal 2022 first quarter (ended March 31, 2022), WEC’s operating revenues rose 8.1% from the year-ago value to $2.91 billion. Its operating income increased 16.2% year-over-year to $731.40 million. Net income attributed to common shareholders grew 10.9% from the same period last year to $565.90 million, while its EPS came in at $1.79, representing an 11.2% increase year-over-year.

Analysts expect WEC’s EPS and revenue to increase 2.2% and 5.7% year-over-year, respectively, to $0.94 and $1.85 billion in the fiscal third quarter (ending September 2022). It surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.

Over the past year, the stock gained 9%, closing the last trading session at $97.16.

WEC’s POWR Ratings reflect solid prospects. The company has a B grade for Momentum. The stock is ranked #41 in the same industry.

Click here to see the other ratings of WEC for Growth, Value, Stability, Sentiment, and Quality.


AIG shares were trading at $52.26 per share on Monday afternoon, down $0.51 (-0.97%). Year-to-date, AIG has declined -7.01%, versus a -17.62% rise in the benchmark S&P 500 index during the same period.



About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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