In today’s uncertain economic climate, I put high value on my modest passive income stream.
With persistent inflation and stubbornly high interest rates, earning a steady stream of cash from reliable dividend-paying companies is deeply comforting. Particularly when the potential for a recession remains ever-present.
While no stock is entirely recession-proof, some firms have the consistency and scale to keep rewarding shareholders through even the toughest times.
Here are three passive income stocks I think investors should consider holding regardless of the economic weather.
National Grid
National Grid (LSE: NG) is about as defensive as it gets. The company operates critical energy infrastructure in the UK and parts of the US, meaning demand for its services tends to remain stable — even during downturns.
Regrettably, it was forced to cut dividends this year, ending an uninterrupted run of over 20 years of growth. But with a sustainable payout ratio of 77.4%, it still offers a 4.4% dividend yield backed by an operating income of £4.76bn. It has a market cap of £52.3bn and has been paying dividends for as long as most investors can remember.
One red flag is the utility’s £40.6bn debt load. In a high-interest-rate environment, the cost of servicing this debt could impact future dividend growth. Still, I view the stock as a solid cornerstone of a passive income portfolio.
Unilever
Unilever boasts an impressive portfolio of everyday consumer essentials, from laundry products to tea. This gives it dependable earnings power, even when household budgets tighten.
The company currently pays a 3.4% dividend, supported by a healthy payout ratio of 75% and a remarkable 20-year dividend track record. It’s a true dividend hero, with an operating income of £9.47bn and a £108bn market cap.
But it’s at risk from stiff competition, particularly if consumer preferences shift rapidly or private-label competition heats up. Even so, I believe the brand power of products like Dove and Hellmann’s makes Unilever a defensive anchor in my portfolio.
Tesco
Supermarkets tend to perform well in downturns, and Tesco – the UK’s largest food retailer – is no exception. Consumers may cut discretionary spending, but groceries remain essential.
Tesco currently offers a 3.3% yield, which is well covered with a payout ratio of just 57.6%. The firm has eight consecutive years of dividend payments and earns an operating income of £3bn, with a manageable £10bn debt load on a £27.6bn market cap.
A key risk here is its razor-thin 2% net margin. Although typical in the retail sector, a spike in input costs or fierce price competition could hurt profits.
Nonetheless, I see Tesco as a dependable source of passive income in lean times.
A financial safety net
Passive income isn’t just for retirement — it’s a strategy that can provide peace of mind in turbulent times.
While each of the above companies carries its own risks, they also boast excellent dividend track records, strong market positions, and recession-resistant business models.
For these reasons, they’re three stocks I’m happy to keep holding no matter what the economy throws my way.
