I like the sound of recession-proof dividend stocks, but the truth is, we don't know when and where the next economic weak spot will hit. We certainly don't know how deep the downturn can be or if it will affect some companies or sectors more than others.
That said, Brian Bollinger's list of 10 stocks to weather the next recession did weather the last financial crisis well. Each stock yields more than 2%. Let's dig down and take a closer look at the technical charts of these 10 stocks.
In this daily chart of McDonald's ( MCD) , above, we can see a 10-month top formation. Just move your eyes across the $115 level. Technicians call this horizontal line a "neckline." Notice how prices bounce off $115 from December to August and September. All the rallies in McDonald's since December have failed, with prices coming back down to that neckline. The slope of the 50-day average line turned down in June, and the slower-to-react 200-day average is now rolling over.
Another observation we have about the McDonald's chart is the on-balance-volume line, which has largely gone sideways to lower since May. A declining OBV line suggests that sellers of MCD have been more aggressive than buyers. Why? The OBV line declines when the volume of shares traded in a stock is heavier on days when it closes lower. This is an indication that sellers are anxious to get out of a security.
In the lower panel is the moving average convergence/divergence oscillator, which is still below the zero line. Thus, prices are considered to be in a downtrend.
So can McDonald's weather a recession and continue to pay its dividend? The answer to that question is above my pay grade, but I can say that the price chart of McDonald's looks vulnerable to a significant decline. I am not sure a 3.05% yield will make a decline more palatable.