Stock Market Corrections Are Inevitable: 3 Dividend Stocks to Prepare Your Portfolio

Stock market corrections are inevitable, and history suggests that another one is due soon. According to MUFG data, the U.S. stock market has endured 37 corrections since 1945, with these declines typically occurring about every 2.2 years. The last correction happened in April 2020, when the market tumbled about 20% from its peak.

While it's impossible to predict exactly when the next correction will occur, investors can prepare by adding defensive holdings that have historically performed well during downturns. Three such dividend stocks are Realty Income (O), Procter & Gamble (PG), and WM (WM).

Realty Income has outperformed the S&P 500 in 11 of the last 13 corrections, with an average decline of only 2.6% compared to a 22.6% drawdown in the S&P 500. The REIT's durable cash flows come from its globally diversified portfolio of retail, industrial, gaming, and data center properties secured by long-term net leases.

Procter & Gamble has one of the most durable businesses in the world, with a leading portfolio of consumer household products that have helped support its extremely durable dividend. The company generates very durable cash flows ($19.6 billion last year) and returns lots of cash to shareholders through dividends ($10.2 billion) and repurchases ($5 billion).

WM also has a resilient business, with homes and businesses needing their garbage and recyclables collected and handled regardless of the economic situation. The company turns trash into stable, growing cash flow that provides it with funds to grow its business, return money to shareholders, and maintain its fortress financial profile.