Shield Your Investments: 3 Key Defensive Stocks For Navigating The 2024 Economic Landscape

The stock market has rebounded spectacularly from the bearish trend last year, as the S&P 500 index registered its longest weekly winning streak since 2017, rising over 23% year-to-date. The tech-focused Nasdaq Composite Index has gained over 43% so far this year. 

While the Federal Open Market Committee's dovish speech drove the current market rally, many analysts predict the upswing to be short-lived as the global economy stands on the precipice of a mild recession. Amid slowing consumer spending levels and increased geopolitical tensions impacting the global supply chain, UBS Group's Managing Partner Michael Riesner believes the current rally to be a bull trap. 

"We still think that the current breakout is the setup for a classic bull trap instead of believing in the start of a larger breakout campaign," Riesner told CNBC.

Deutsche Bank's economists also issued a cautious outlook for 2024, as monetary policy lags are "highly uncertain in their timing and impact."

As recession risks run rampant, investing in large-cap defensive stocks can hedge portfolios in the event of a market downturn. 

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Lockheed Martin 

Lockheed Martin Corp. LMT is one of the largest global security and aerospace companies in the U.S. with a market cap of over $111 billion. The company manufactures defensive equipment and aircraft. Lockheed Martin stock has risen by more than 8% over the past three months in the wake of the Israel-Palestinian conflict. 

Lockheed has an impressive dividend payout history, as it pays $12.60 annually in dividends. This translated to a 2.8% yield on Lockheed Martin stock. The company also hiked its dividend payouts for 21 consecutive years as of 2023, positioning it to join the elite Dividend Aristocrat list, which comprises publicly traded companies that have hiked their dividends for 25 consecutive years. 

As geopolitical tensions remain rampant, Lockheed Martin is expected to deliver strong results in the upcoming months. With the U.S. forming a 10-nation alliance to mediate in the Red Sea attacks as well as the country's worsening relations with China, the defensive stock is poised to grow substantially in the near term.

According to a Reuters estimate, Lockheed Martin stock is expected to rise between 5% and 7% over the next year, while the S&P 500 index is expected to deliver muted gains as recessionary concerns linger.

Fortis

Based in Canada, Fortis Inc. FTS is one of North America’s largest electric and gas utility companies, with over $66 billion in total assets as of Sept. 30. Fortis raised its dividend payouts for 50 consecutive years as of 2023, making it a Dividend King stock. 

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Fortis pays $1.69 in dividends annually, yielding 4.18% on the current price. The diversified leader in the energy industry raised its quarterly dividend payouts by 4.4% to CA$0.59 ($0.044) per share in the fourth quarter of 2023 paid on Dec. 1.

Fortis also issued an annual dividend growth guidance in the range of 4% to 6% through 2028. The company is taking steps to reduce its carbon footprint, as it unveiled a $25 billion capital plan from 2024-2028 primarily allocated to investing in cleaner energy projects. 

Analysts expect Fortis's annual revenue to amount to $8.71 billion in fiscal 2023, indicating a 5.5% year-over-year increase. The consensus earnings per share (EPS) estimate of $2.31 for the current year indicates an 11% increase from the same period last year. 

Northrop Grumman

Northrop Grumman Corp. NOC, a global aerospace and defense technology company, has been gaining momentum since the crisis in the Middle East intensified. 

Northrop, which is one of the primary rocket manufacturers for the U.S., has reported a rapid rise in demand for its rocket motors and warheads since the onset of the Russia-Ukraine war.

Northrop Grumman is a dividend aristocrat stock, as it has raised its annual dividend payouts since 1997. The company currently pays $7.48 in dividends annually, yielding 1.63% on its share price. 

Northrop recently approved an increase in its share repurchase program by $2.5 billion, bringing the total capital authorized for share repurchases to $3.8 billion.

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