Recession 2013 Doesn't Have to Kill Your Profits

Not only is each situated to withstand the adverse effects of an economic downturn, each attracts consumers who aim to save money or whose lifestyles change in recessionary environments.

For example, Public Storage provides self-storage facilities in the United States and abroad.

In rough economic times, more people need storage sheds to hold their personal items as houses are lost to foreclosure, families double-up, children move back home or larger dwellings are no longer affordable.

Public Storage has been able to benefit from this trend, displaying earnings-per-share growth of 58.64% for the last five years. This has continued as earnings-per-share growth this year is up another 41.77%.

McDonald’s has also enjoyed healthy earnings-per-share growth. With the Golden Arches soaring over streets in about 120 countries McDonald’s has a geographically diverse base. That has led to earnings-per-share growth for McDonald’s over the past five years of 18.13%. For this year, earnings-per-share growth has increased by another 15.03%.

And earnings-per-share growth for Wal-Mart rose by 9.19% over the past five years.

Much of these companies’ earnings-per-share growth has stemmed from sales in emerging market countries.

Even during The Great Recession, the middle class in emerging market nations continued to grow. Msn.com financial columnist Jim Jubak considers the burgeoning consumer segment around the globe to be the most important investing trend of the decades ahead.

Wal-Mart has a strong presence abroad, particularly in China. It also appears more likely that Wal-Mart will soon enter India, the world’s second most populous nation.

Reinforcing the overall appeal for these companies is the healthy dividend income paid to its shareholders. In recessionary times dependable streams of income become even more valuable as do the companies that offer steady, increasing dividends.

Jack Bogle, founder of the Vanguard mutual fund group and creator of the first index fund, reports in his book Enough that about 40% of the historic total return of an equity has come from the dividend component.

Increasing earnings year-over-year makes it easy for Public Storage to reward its shareholders with a 2.96% dividend yield, which should increase. McDonald’s has a tradition of also increasing its dividend, which now yields 3.05%, and Wal-Mart’s dividend yield is 2.13%. With a very low dividend payout ratio, look for Wal-Mart to increase its dividend.

A tactic that investors should deploy during recessionary times: Set a target yield for the dividend income of each of these stocks and then buy when it is reached. If these stocks slip you’ll get a higher dividend yield. When the stock price recovers for McDonald’s, Wal-Mart and Public Storage from their rising earnings-per-share growth, investors will profit from the share-price gains while earning a solid dividend at the same time.

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