The U.S. Bureau of Economic Analysis (BEA) is set to release the advance estimate for Q1 2025 GDP this Wednesday, April 30, at 8:30 AM. Economists are projecting a significant slowdown in economic growth, and forecasts show annualized growth of just 0.4% for the first quarter. The quarter could see dismal growth as GDPNow estimates a -2.5% contraction.
The slowdown is more “artificial” due to weakening consumer spending and a surge in imports ahead of new tariffs. It’s a good idea to prepare for the data by having exposure to defensive stocks that usually benefit during market downturns. These stocks have inelastic demand and are unlikely to be sold off even if the GDP data comes in badly.
Flowers Foods (NYSE:FLO) has been a model of consistency in the past two decades. It has delivered very reliable returns that outpaced inflation with a steadily rising dividend. However, FLO has stumbled in the past three years and completely fallen off its earlier trajectory. In fact, it is now down 19.6% in the past five years.
The main culprit is the sluggish top-line growth in its core categories. Traditional loaf breads and sweets were once cash cows, but they are now seeing declining volumes due to consumers shifting to more premium and health-oriented products. The company has been grappling with higher input costs while facing challenges in passing these costs along to consumers. That said, it’s not as bad as you might imagine it to be when you look at the FLO stock’s price chart.
Flowers Foods’ 3-year EPS growth minus non-recurring items is at 1.1%. This is much worse than the 10% EPS growth it has had on average over the past decade, but positive nonetheless. If GDP data release triggers a flight to safety, FLO stock could still rise since it is a very solid defensive play at these levels. There’s compelling downside protection now.
The biggest draw for me apart from the counter-cyclical appeal is that FLO stock comes with a 5.38% dividend yield.
Johnson & Johnson (NYSE:JNJ) exemplifies the type of company that historically attracts investment during uncertain economic periods. It’s mainly why the stock has outperformed the broader market year-to-date and is up over 7%. The outperformance here isn’t coincidental since pharmaceutical stocks are more insulated from recessions.
The company has also done quite well so far. It has posted strong Q1 results and raised its guidance. It reported an adjusted EPS of $2.77 on revenue of $21.89 billion and handily beat analyst expectations of $2.56-$2.59 EPS for $21.56 billion in revenue.
Management raised full-year guidance despite headwinds. The company increased its projected operating sales range to $91.0-$91.8 billion, up from $89.2-$90.0 billion previously, while maintaining its adjusted EPS forecast at $10.50-$10.70. This guidance includes accommodations for approximately $400 million in anticipated tariff costs for 2025.
On top of that, JNJ comes with a dividend yield of 3.36%. It has been hiking dividends consistently for 64 years straight. Investors are likely to pile into the stock when more defense is needed.
Waste Management (NYSE:WM) is North America’s largest provider of environmental services, from waste collection and recycling to landfill gas-to-energy operations. Even in downturns, municipalities, businesses, and consumers need waste services. This gives WM a predictable revenue stream that is very insulated from GDP swings.
Q1 earnings are due to be out on Monday, April 28. As of writing, that’s less than 24 hours away. Analysts expect a modest year-over-year dip in EPS for the quarter, but full-year 2025 earnings are projected to rise 5.5% to $7.63 per share, with further growth into 2026. The company’s own guidance pegs 2025 revenue between $25.55 and $25.8 billion.
Of course, no stock is risk-free, but it should be pretty self-explanatory why WM stock should fare much better in a volatile environment. If anything, it should see investors pile in as Wall Street de-risks. Waste Management is the kind of stock that rarely goes on sale.
The dividend yield here is at 1.45% with 22 consecutive years of dividend hikes. That’s a low dividend, but I wouldn’t complain since the stock has climbed 132.5% over the past five years. That’s more than the S&P 500 and the Nasdaq Composite.
