The world hasn’t yet found a way of living without oil. So, I’m confident about my portfolio in the long term. However, oil price volatility is concerning. And it’s more troubling now than usual because it is combined with the effects the coronavirus-induced economic shut-down.

In these circumstances, it makes sense to try to protect your passive income from as many market volatilities as possible. A balanced, all-weather portfolio can help to achieve this. And in a recession, defensive stocks can be a real comfort blanket.

Firms in this sector sell goods in constant demand that meet physiological needs. When money is tight, peoples’ spending priorities are on essential items, not buying oil stocks. And these are often reflected in the profitability of those businesses that provide accordingly.

Two best defensive shares

Indeed, hygiene-product seller, Reckitt Benckiser (LSE: RB) depends on hygiene product revenue for 25% of its business. Reckitt owns many well-known brands including Dettol, Harpic, and Cillit Bang. Sales for these items are currently growing due to the Covid-19 pandemic. This should help the firm grow its revenue, profitability, and, hopefully, dividend income.

Moreover, Reckitt’s recent purchase of baby formula maker Mead Johnson provides the consumer staples giant with an extremely profitable consumer health business. And another category leader with pricing power. After a relatively flat period, its long-term prospects are good. 

Food is another essential good. I think FTSE 250 star Tate & Lyle (LSE: TATE) is a hidden gem. Tate’s stock has risen by about 75% over the last 10 years but this trend is often overshadowed by the disappointing share price performance of 2016 and 2018.

However, the business has refocused since then. Tate’s 2019 half-yearly results showed sales up 2% and operating profit up 3% from 2018. Its efficiency measures appear to be working and the firm is looking for acquisitions to grow its food and beverage solutions division. Indeed, the firm is currently outperforming the FTSE 250.

Passive income stars

I think both these companies are passive income stars.

Reckitt Benckiser is one of the Top 20 FTSE 100 dividend payers for passive income. These are the few companies that pay out the bulk of dividends across the index. The 2.69% yield is not bad and with a dividend cover of 1.88, it is affordable. Reckitt is currently trading around 6,474p, with HSBC giving it a price target of 6,800p. So, there may be room for growth here too.

Tate & Lyle boasts a juicy yield of just under 4.4.%, high for the food sector. Its dividend cover is 1.64, meaning your passive income is well covered by the firm’s earnings. Also, its dividend per share has improved from 23p to 29p over the last 10 years. And the firm has never missed a payment.

A dividend stock should provide you with a stable passive income by being reliable, unlike oil stocks. Both of these companies have demonstrated this over time. Neither Reckitt nor Tate are likely to offer you big upsides in a bull market. But right now, the predictable nature of the businesses and the sustainable dividends on offer are trade-offs I’m delighted to make.

The post Forget oil stocks! I’d buy these 2 best shares now for passive income appeared first on The Motley Fool UK.

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Rachael FitzGerald-Finch has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Of the 50 plus companies reporting earnings or their current trading next week, I have picked out four interesting ones. As per the chart below, three have outperformed the FTSE 100 over the last quarter, probably due to the defensive nature of the businesses, while one has underperformed, which may have presented investors with an opportunity. Let’s take a closer look…..

High fashion

All eyes will be on Associated British Foods (LSE: ABF) when they report the final results to the market on Tuesday. Since reporting interims back in April, the share price has been on an upward trajectory, rising by 28%.

When management updated the market in September, they expected the full year results to be in line with expectations. Operating profit at constant currency was forecast to be ahead of last year for Grocery, Agriculture, Ingredients and Retail. However, the decline in operating profit in Sugar and the net adverse impact on the translation of overseas results arising from the strengthening of sterling, totalling some £30m, would give rise to an overall decline in adjusted operating profit for the group.

Turning to valuation, the shares currently trade on a forecast price to earnings (P/E) ratio of around 34 times earnings – that’s more than twice the market median of 14.1. Additionally, there is a forecast yield of just 1% on offer, well below the 3.09% market median according to data from Stockopedia.

Top tobacco

Also vying for investors’ attention on Tuesday will be Imperial Tobacco (LSE: IMT). For obvious reasons, this is not everyone’s cup of tea. However, those who held their nose and bought the stock just 12 months ago would be sitting on a 30% capital gain, while enjoying a 5% yield.

The company last updated the market in August, with management sounding very confident in relation to the strength of their portfolio, the development of the footprint, cost optimisation and strong capital discipline. All in, they expected results to be in line with expectations.

Despite the 30% rise in the share price, the shares are still trading on a forward P/E of 15 times earnings and yielding over 4%, which for a quality company such as this still looks attractive despite the rise in the share price.

Sugar and spice

And all things nice? That will be the question for investors following Thursday’s interims from Tate & Lyle (LSE: TATE) after what has turned out to be a tough trading environment over the last 18 months.

The general trading weakness appears to have had a rather detrimental impact on the share price with the shares trading at a 25% discount to their price 2 years ago. Still, this is perceived by the market to be quite a defensive share, which I think is reflected in the forecast P/E of over 16 times earnings, supported by the 4% plus yield on offer here.

It is unlikely that there will be too many surprises in the results — indeed, management guided the market to expect ‘in line’ results at the start of this month.

Banking on a recovery?

Last up is HSBC (LSE: HSBA). This UK-listed banking giant has seen its shares slump by 19% over the last year. It is hardly surprising given the decline in analyst earnings expectations, which have fallen from EPS estimates of 94 cents per share in October 2014 to 79 cents currently. Once investors start to factor in worries over the global economy, and in particular China, it doesn’t take a genius to work out why the shares have been under pressure of late.

Investors will also be expecting a progress report on the bank’s strategy update to focus its operations on the perceived high-growth of offer across Asia, not to mention an update on the latest charge for PPI mis-selling.

Despite all the negativity, the consensus analyst share price target is some 18% higher than where it currently trades. Additionally, it trades on a sub-10 P/E and offers a yield approaching 7%.

Whilst not without risk it’s certainly worthy of further research, in my view.

The post The Week Ahead: Associated British Foods plc, Imperial Tobacco Group plc, Tate & Lyle plc and HSBC Holdings plc appeared first on The Motley Fool UK.

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Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.