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Investing Specialists

Why Own Stocks in a Recession? Dividends!

Investing in the essentials is literally "yielding" good results.

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From the looks of recent trading in the stock market, nobody is waiting around for the authorities at the National Bureau of Economic Research to formally declare the U.S. economy in recession. Amid record price volatility, investors are now turning over their portfolios to leave cyclical sectors and seek "safe havens" in recession-resistant industries.

As editor of Morningstar DividendInvestor and manager of its two income-generating model portfolios, I haven't had this problem. I discovered--to my delight--that my pursuit of dividends is yielding (if you'll pardon the pun!) a very nice side effect: I didn't own deeply cyclical stocks in the first place, for the simple reason that they're not very good at paying reliable dividends.

There's Always a Recession Coming!
I'm something of an armchair economist, and I find it both interesting and useful to think about the ways that major economic institutions interact with one another. And, like many observers, I've been worried about the major structural imbalances (asset bubbles, trade deficits, negative household savings rates) that have been plaguing the U.S. economy for a decade now.

Josh Peters, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.