I can understand if you want recession proof income from your portfolio. There are few ASX shares that may be able to truly provide that.
All the talk about sinking global growth and a potential Aussie downturn may cause you to worry.
When looking for businesses that may be able to provide the solid income you’re looking for I think it’s important to cut out the sectors that won’t fit the bill.
For example, cyclicals like banks, retail and resources are out in my opinion. Therefore shares like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Wesfarmers Ltd (ASX: WES) are probably out.
I think these three ASX shares are worth considering:
Duxton Water Ltd (ASX: D2O)
Duxton Water is supposedly the only listed company in the world that purely owns and leases water entitlements.
Water is a very important asset for as agricultural businesses and there’s only a limited supply of it in Australia, that’s why its value is rising over time.
The current drought conditions have been a very useful boost to the value of Duxton’s water.
Owning Duxton Water shares could also be a good way to indirectly benefit from the growth of Australia’s agricultural industry acting as Asia’s food bowl.
Duxton Water currently has a partially franked dividend yield of 3.5%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Commonly known as Soul Parts, this business could be one of the most defensive on the ASX.
It has already proven it can survive through all the wars and recessions that have happened in its century-long history, all whilst paying a dividend every year.
If there were to be a recession, I’d expect Soul Parts to be one of the ones to benefit because it could invest at cheap prices.
Soul Patts has a grossed-up dividend yield of 3.1%.
InvoCare Limited (ASX: IVC)
InvoCare is the largest funeral operator in Australia. Sadly, people pass away at all points of an economic cycle and a funeral is one of the things that families will most likely want to spend money on, even in a recession.
The company actually has a long-term tailwind due to Australia’s ageing population. Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.
InvoCare has increased its dividend each calendar year since 2006, so there’s a good chance it can keep growing the dividend despite the short-term issues it is currently facing.
It currently has a trailing grossed-up dividend yield of 6%.
I believe the dividends of all three of these companies will be reliable over the next three years and they will deliver long-term dividend growth as the years go by. None of them are trading cheaply compared to their underlying value. I’d probably go for InvoCare today because of how far it has fallen over the past year.
Want some more recession proof ASX share ideas? You should look at these rock solid dividend stocks.
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Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO, InvoCare Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers Limited. The Motley Fool Australia has recommended Brickworks, InvoCare Limited, and TPG Telecom Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.