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Stocks That Can Perform in a Bearish Market

Real Money's Bob Ciura makes the case for these high quality dividend stocks for investors concerned about a market tumble.

Market volatility has spooked many investors who fear July's 700-point fall in the Dow Jones Industrial Average is a harbinger of more declines in the stock market.

Although the market bounced back on July 21 and rose by over 500 points, some investors remain fearful and wary as the global pandemic continues and cases of people being infected with Covid-19 rise.

Investors shouldn't sell their stocks because they fear more volatility; they instead should rotate to buying dividend aristocrats, which are high quality dividend growth stocks that have generated yields for over 25 years, Real Money contributor Bob Ciura wrote in a recent column, 3 Bear Market Stocks for Steady Dividends.

Ciura is a fan of Procter & Gamble  (PG) - Get Procter & Gamble Company Report , McDonald's  (MCD) - Get McDonald's Corporation (MCD) Report and Walmart  (WMT) - Get Walmart Inc. Report and believes they can outperform in a bear market. These three companies have “recession-resistant business models, long histories of raising their dividends through recessions and above-market dividend yields,” Ciura wrote.

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Procter & Gamble not only has paid a dividend for over 130 years, the company also increased the yields for the past 65 consecutive years.

“P&G is a top pick for a bear market because its industry-leading brands see steady demand each year, even during recessions, which fuels the company's steady dividend payouts,” Ciura wrote.

McDonald’s has demonstrated that it can weather recessions fairly well — the fast food giant grew its earnings per share during the Great Recession of 2008-2009. The blue-chip stock has increased its dividend annually since 1976. In 2020, the company raised its dividend by 3% unlike its competitors that either suspended or slashed their dividend payouts.

Walmart is another business that is immune to the recession and increased its sales by 6.7% to $35 billion in 2020, Ciura writes.

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“Its focus on everyday low prices is the reason behind its extremely resilient business model,” he wrote. “Walmart's steady profits, no matter the economic climate, allow the company to return lots of cash to shareholders. Last year, the company increased its dividend for the 48th consecutive year, and it approved a $20 billion share repurchase.”