There is no doubt that after 25 years we are probably getting closer to a recession.
Australia might just experience a short period of two quarters of decline and then return back to growth, but you never know what's going to happen.
I think it's best to hold shares you'd be happy holding at all points of the economic cycle, particularly ones that may be able to continue increasing their income payments to shareholders, such as these three which I own in my portfolio:
Rural Funds Group (ASX: RFF)
The real estate investment trust (REIT) sector seems to be doing quite well compared to the overall market in recent times. One of my favourite REITs is Rural Funds, which is a farmland landlord.
Agricultural businesses don't necessarily perform in line with the economic performance of the economy. Global demand for food continues to grow with a rising global population. Rural Funds aims to increase its distribution to shareholders by 4% every year off the back of built-in rental increases with its tenants.
Rural Funds continues to re-invest into its properties with the 20% retained of its earnings to boost its future rental income.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is my favourite business on the ASX. It's a century-old investment house that takes large stakes in businesses (both listed and non-listed) it thinks are compelling long-term opportunities that produce good cashflow.
Its diversified holdings like Brickworks Limited (ASX: SOL), New Hope Corporation Limited (ASX: NHC) and TPG Telecom Ltd (ASX: TPM) could nicely cushion it against an economic dip. The fact it can alter its holdings as the years go by is very useful to defend against disruption.
Soul Patts has increased its dividend every year since 2000, including through the GFC, which is the perfect way to survive through a recession.
Duxton Water Ltd (ASX: D2O)
Duxton Water is the only business of its type, it owns water entitlements and leases them to agricultural players.
Demand for water changes with rainfall, not economic conditions. Duxton Water has proven very shrewd at acquiring the right water entitlements to benefit from the current dry conditions. Its underlying assets have grown in value significantly over the past year.
Duxton Water is steadily growing its dividend, which is a useful way to reward shareholders along the possibly-cyclical journey as water entitlements go up (and sometimes down) in value.
Foolish takeaway
I'm proud to own all three of these businesses in my portfolio and I'm confident all of them can keep growing their dividend payments to shareholders at least over the next three to five years. I believe they could be very good choices to be fairly recession proof.
