There is an increasing amount of chatter about recession at the moment. Experts are poring over short-term and long-term bond yields, alongside rising geopolitical and inflation risks, in search of signs that an economic downturn could be around the corner.
Generally, we expect long-term bond yields to be higher than the yield on short-dated notes. When they aren’t, it suggests that economic growth might not only slow, but could even go into reverse. That is why some people closely monitor yield-curve inversions.
So, here’s the thing: recessions are nothing out of the ordinary. They generally happen after long periods of economic growth. It is the economy’s way of telling us that it is time to take a breather and digest the growth that we have achieved. In the same way that tides ebb and flow, economies shrink and grow, too. But in the main, well-managed economies and resilient businesses should continue to grow over the long term.
Trying Times
Just look at what has happened in Singapore. Since the 1960s, the size of our economy has grown from US$700 million to over US$500 billion, despite some shrinkages along the way. That is not to say that recessions aren’t painful. Some businesses could be forced to downsize as demand for their goods and services is reduced. Some weaker companies could even be forced to shut their doors completely.
The upshot is that recessions can be a trying time for investors. But it is possible to recession-proof our portfolios to some extent with the right types of investments. These are often labelled as defensive shares because these companies should be able to deliver stable profits regardless of where we might be in the economic cycle.
By and large, their products and services are in demand all the time. However, the problem is that when the economy is doing well, they will still only plod along in the same way as when the economy is going gangbusters. Consequently, whilst they may outperform the market during tough economic times, they could underperform the wider market during the boom years.
Dull But Worthy
So, which companies can endure economic downturns? Utility companies such as Sembcorp Industries (SGX: U96) and Singtel (SGX: Z74) are some examples of defensive shares. We all need to use water, gas, electricity, and our mobile devices, regardless of economic conditions. Across the causeway, Tenaga Nasional (KLSE: 5347) has been a stock market darling because of its consistent dividend payout.
Supermarkets are generally seen as defensive because we all have to eat. That said, sometimes there could be company-specific issues. DFI Retail Group (SGX: D01), formerly Dairy Farm, had its share of challenges in years past, but has recently pivoted back to growth, rewarding patient shareholders with a significant special dividend in 2025.
Then there is Sheng Siong (SGX: OV8). It has been a marvel of consistency, with revenue climbing from S$637 million in 2012 to a record S$1.57 billion in 2025. This growth didn’t stall after the pandemic; instead, it has continued to expand its footprint across Singapore’s heartlands. More importantly for income seekers, Sheng Siong’s total dividend has more than doubled from S$0.03 a decade ago to S$0.07 for FY2025. This isn’t magic – it’s the result of defensive shares being highly cash-generative businesses that can share their success with you, come rain or shine.
What the Doctor Ordered
The healthcare industry is another dependable defensive sector. We don’t have many world-class pharmaceutical companies listed on the Singapore stock market. But we do have healthcare REITs. The thing about healthcare is that we don’t exactly have much choice when it comes to seeing a doctor or seeking treatment.
Parkway Life REIT (SGX: C2PU) remains an excellent proxy for this sector. As a premier hospital landlord, it counts Gleneagles, Mount Elizabeth, and Parkway East as its three key tenants in Singapore. It has also strategically expanded its footprint to include over 50 nursing homes in Japan, tapping into the region’s ageing silver generation.
Over the last decade, Parkway Life REIT has been a model of consistency. It has delivered a total return exceeding 180%, which equates to an impressive annualised return (including reinvested dividends) of roughly 11%.
For the income-seeking investor, it’s just the kind of “medicine” a recession-proof portfolio needs.
Time for a Drink
The alcohol industry is often seen as defensive. We might not go down to the hawker centre as often for a beer when the economy is bad, but that doesn’t mean we won’t have a quiet drink at home. Thai Beverage (SGX: Y92), the giant behind Chang beer and a dominant spirits portfolio, remains one of the region’s largest players. Despite a softer consumer landscape in 2025, it remains a cash-generating powerhouse, with its FY2025 free cash flow rising to THB 33 billion – more than enough to comfortably cover its dividends.
Brewing and distilling may not be the most exciting of industries but then again, neither are utilities, supermarkets, and healthcare. Yet, these companies are the reliable workhorses of any resilient portfolio. They are steady, cash generative and should not give investors too many sleepless nights in any economic condition.
By focusing on these cash-rich businesses, we can protect our portfolios from the worst of a recession and reinvest those dividends to supercharge our total returns over the long run.
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Disclosure: David Kuo owns shares of Tenaga Nasional, Dairy Farm International, Parkway Life REIT and Thai Beverage.
