When share market volatility arises, the wisest investment decision is to lean into ASX defensive stocks.
Defensive stocks are companies whose earnings tend to remain relatively steady throughout times of economic instability. They typically operate in "non-discretionary" industries where demand remains relatively stable even when consumer confidence dips.
Their stable nature means they can help reduce the volatility of an overall investment portfolio.
This is particularly important during the current economic climate, where geopolitical tensions, stubbornly high inflation, and erratic sentiment are causing some ASX stocks to fluctuate wildly in value.
Here are three excellent ASX defensive stocks I'd have in my portfolio to weather the next storm.
Image source: Getty Images
Telstra Group Ltd (ASX: TLS)
Telstra is a dominant Australian telecommunications company.
It owns and operates the nation's largest mobile network and is a major fixed-line internet provider. Mobile phone and internet services are not considered daily necessities but rather discretionary items, which makes Telstra a classic ASX defensive stock.
The company is well-positioned to record a stable revenue and earnings, regardless of the stage of the economic cycle or how the ASX is faring overall.
Telstra's defensive nature also means it can pay shareholders a consistent, reliable passive income.
The telco's most recent dividend was paid out in March. Shareholders were given an interim dividend of 10.5 cents per share, 90.48% franked.
For FY26, Telstra is forecast to pay a total dividend of 21 cents (up from 19 cents in FY25). This translates to a forward dividend yield of around 4.1% excluding franking credits, at the time of writing.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is a leading Australian blue-chip company. At the time of writing, the business is the 7th largest company listed on the ASX with a market cap of around $90 billion.
The company is well-established and financially sound with a history of reliable growth and stability.
It's this stability and consistent long-term net profit growth that make the company a fantastic ASX defensive stock. It also means Wesfarmers is able to pay a reliable and consistent passive income to shareholders.
Wesfarmers' most recent dividend payment was handed out to investors in February. The Kmart and Bunnings owner paid a fully-franked interim dividend of $1.02 per share, up 7.4%.
For FY26, the ASX defensive stock is expected to pay a total $2.13 dividend per unit, which translates to a forward dividend yield of around 2.7% at the time of writing.
Transurban Group (ASX: TCL)
Transurban is a global infrastructure business that builds and operates major urban toll road networks, tunnels, and bridges. It operates 22 assets across Australia, the US, and Canada.
It is widely considered a high-grade defensive ASX dividend stock.
That's because roads are an essential service. Even in the event of a downturn, people still need to travel to work or transport goods and services. Transurban's toll roads typically have stable traffic volumes year-round, which means the business enjoys resilient cash flow regardless of economic conditions.
Another bonus is that most of its toll roads are on an annual contract. This means Transurban is able to increase its toll prices each year in line with rising inflation.
In February, the toll road operator paid an interim dividend of 34 cents per share, unfranked, to its shareholders.
For FY26, the company has forecast a distribution of 69 cents per security, which implies a forward dividend yield of around 4.6%, at the time of writing.
