2 Dividend Stocks You Can Safely Hold During a Recession

Recessions are hard to predict. Even professional economists sometimes get it wrong. But they do happen from time to time, and sometimes they drag the stock market down. That’s why investors should buy stocks that can do relatively well even during recessions.

So which stocks are worth investing in? Solid dividend stocks can be great choices. Their ability to maintain or even increase payouts regardless of economic conditions speaks volumes about the strength of their underlying businesses.

With that in mind, let’s consider two dividend stocks that can help investors weather the toughest recessions: AbbVie (NYSE: ABBV) AND Merck (NYSE:MRK).

1.AbbVie-pl

There is a good reason why healthcare is considered a defensive industry. Many medical products and services are not luxuries. They are essential to people’s health and sometimes their lives.

That’s certainly true for pharmaceuticals, which are AbbVie’s core business. The company boasts a pipeline of drugs that includes Skyrizi and Rinvoq in immunology, Venclexta and Imbruvica in oncology, Vraylar and Qulipta in neuroscience, and more. AbbVie can no longer rely on Humira—the world’s best-selling drug at its peak—to drive growth. It lost U.S. patent exclusivity last year.

Still, the company’s financial performance is pretty solid, considering. In the second quarter, revenue totaled $14.5 billion, up 4.3% year over year. It’s not uncommon for pharmaceutical companies to go through several years of declining revenues after a significant patent decline — and that’s no cause for concern. AbbVie’s management initially predicted the company would return to revenue growth in 2025. The company is well ahead of schedule, which says a lot about the business. AbbVie prepared for this test early and is handling it as well as we could have expected.

Elsewhere, AbbVie has dozens of clinical trials in progress. It also is bolstering its pipeline with acquisitions. It recently completed the $8.7 billion buyout of Cerevel Therapeutics, a clinical-stage biotech focused on neuroscience. Whether through acquisition or internal development, AbbVie has the tools to continue developing important medicines.

Its current growth drivers, Skyrizi and Rinvoq, will generate more than $27 billion in sales by 2027 and continue to grow into the 2030s, according to management. By comparison, Skyrizi and Rinvoq had combined revenue of $11.7 billion last year.

What about AbbVie’s dividend status? The company has raised its payout for 52 consecutive years, including its time under the wing Abbott Laboratoriesits former parent company. AbbVie’s forward profitability currently exceeds 3.16%, compared to S&P500Average of 1.32%.

This drugmaker’s stock is a top pick during a recession because it will likely continue to post relatively high revenues and profits while maintaining its dividend payments.

2. Merck

Merck is also a leading pharmaceutical company. The company’s top-selling drug, Keytruda, took over from Humira as the world’s top-selling drug. This growth stellar drug still has plenty of life left in it, having won dozens of indications for a variety of cancer types in a variety of countries. Merck’s second-quarter revenue of $16.1 billion was up 7% from the same period a year earlier. Keytruda sales of $7.3 billion were up 16% year over year. True, Keytruda’s patent expires in 2028.

But the company seems increasingly ready. Merck is working on a subcutaneous version of Keytruda that will take on some of the drug’s indications. Research firm Evaluate Pharma sees this version of Keytruda as one of the most promising programs in the industry, potentially generating as much as $8 billion in revenue by 2030. While it won’t replace all—or even most—of what Keytruda is currently accumulating, Merck will be relying on other products.

That includes Winrevair, a drug that recently won approval to treat pulmonary hypertension. Merck’s huge potential, particularly in oncology, should also yield a wealth of new drugs in the future. While sales will almost certainly decline once Keytruda’s patent expires, the healthcare giant has the tools to bounce back and thrive long after. Plus, Merck also has a solid dividend history.

The company has increased its payout by 75% over the past decade and now offers a yield of 2.65%. It is unlikely that a recession will interrupt Merck’s business or its dividend streak.

Is it worth investing $1,000 in AbbVie now?

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and Merck. The Motley Fool has a disclosure policy.