A recession in the UK is looking unavoidable now, according to the Bank of England. So, which recession-resistant stocks are best to buy to help weather the storm?
There isn’t any share that is actually recession-proof. But some will surely be more resistant than others. Today, I’m looking at two that I think have safety characteristics.
Soapy safety?
The PZ Cussons (LSE: PZC) share price is still depressed since the pandemic. We saw a mini recovery in 2021, as sales of the firm’s handwashing and sanitising products got a boost.
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But that didn’t last. And we’re looking at a 12-month decline of 13%. So, Cussons is not exactly looking like pandemic-resistant safety, I admit. So why might it be recession-resistant?
Much of the weakness is surely down to the few years of falling earnings the company recorded before Covid arrived. And when something is already struggling, it’s likely to be hit harder by a general downturn.
Refocus
The refocus does seem to be paying off, with earnings growth returning in 2021. And, perhaps more importantly, the dividend was lifted by 5% after suffering a 30% cut in 2021.
That’s only a small rebound. But I find any dividend recovery at such an early rebuilding stage encouraging.
For the year ended May 2022, PZ Cussons says it expects full-year, like-for-like revenue growth of 3%. And that’s with 7% in the fourth quarter.
Forecasts put the dividend yield at 3%, which is still modest. And there’s still some way to go for the company to get back fully on track. So there is clearly risk here. But with a decent outlook heading into a likely recession year, I think PZ Cussons could be a long-term dividend buy.
Convenience food resilience?
Convenience food manufacturer Greencore (LSE: GNC), meanwhile saw earnings collapse in 2021. And its share price went with them. This time, we’re looking at a 12-month fall of 24%.
Forecasts suggests there’s a strong recovery on the way. Based on earnings for the year to September 2021, the stock is on a trailing price-to-earnings (P/E) ratio of 26. But analysts reckon that could halve this year, and keep on dropping over the next two years.
The dividend was canned in 2020, but forecasts suggest it will be back this year and could reach a 5% yield by 2024.
Q3 trading
The third quarter brought a pro-forma revenue increase of 26%, with 31% over the nine months. That’s against a tough prior year. But even compared to 2019, we saw a 14% rise for the nine-month period.
Greencore says it expects “adjusted EPS of between 9.2p and 10.0p“. On the current share price, that suggests a P/E of around 10. That’s even lower than analyst forecasts.
Again, we’re looking at a tentative recovery for a company that has suffered. And there’s no guarantee the upswing will continue, especially not heading into the current economic winds.
But again, I think there’s a safety aspect here, from the company’s position in the business of food to go. I’m holding.
