Think a Recession Is Coming? Five Dividend Stocks to Buy, According to RBC

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The risks of a recession is rising and the case for dividend stocks continues to strengthen.

With some strategists and economists now seeing a recession in 2020 as a 35% likelihood (or higher), income and capital protection may be the way to go. The 10-year Treasury yield of 1.7% is measly compared with a wide swath of dividend stocks in the U.S. market.

The case for dividend stocks just got louder with a Friday morning note from the RBC Capital Markets equity-research team. 

"While the economic backdrop feels slightly firmer in recent weeks, we still see risks of another pullback," the team wrote.

"Against this backdrop, and with low rates and September's factor rotation in mind, we screened RBC's global coverage for three investment styles - Value Dividend, Quality Dividend and Quality Growth." 

Here are five of RBC dividend picks:

  • General Motors (GM) - Get Report : 4.09% dividend yield. GM has trailed the broader U.S. market in 2019, up just 10.7% year-to-date. It's fairly cyclical as an automaker, but the dividend yield represents a large premium over the treasury market. 
  • Halliburton (HAL) - Get Report : 3.84% dividend yield. Halliburton is also down 33% year-to-date. One trading strategist told TheStreet in late August the beat-down oil stocks could soon turn higher, making for an attractive total-return picture. 
  • Valero Energy (VLO) - Get Report : Valero's dividend yields 4.26% at present. Valero has also trailed the broader market, gaining just 12% for the year so far, and is tethered to oil prices. 
  • Coca-Cola (KO) - Get Report : Coca-Cola's dividend yields 2.95%, less than some of the other stocks mentioned. Fortunately, it's a consumer staple and generally exhibits a low stock-price fluctuation. 
  • Union Pacific (UNP) - Get Report : 2.38% dividend yield. It has moved with the broader market, up 18% year-to-date. It's highly cyclical and Morgan Stanley analysts recently said they're concerned about freight volumes.

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