The Best Defensive Stocks for a Downturn in 2025

As sure as night follows day, the next recession is coming. That means investors are looking at what defensive stocks would give them the best chance to protect their portfolio from a downturn.

While in a recent report J.P. Morgan economists cut the odds of a recession (a severe decline in economic activity) occurring in 2025 to 40% from 60%, they added that “a period of sub-par growth could lie ahead,” due to the earlier tariff shock.

Discover our picks of the best defensive stocks for 2025 that could help you ride out the storm. All ten are reasonably priced, yet have shown triple-digit price growth over the past five years. They are profitable with growing revenue, have solid moats and navigate economic downturns well. On top of that, all of them have consistent dividends.

An in-depth look at these top rock-steady defensive stocks

Here’s a closer look on the top rock-steady defensive stocks to invest in. All of these companies have dependable growth profiles and are increasing revenue.  

1. ASML Holdings: Big moat, steady earnings growth at a good price

ASML Holdings (NASDAQ: ASML) has a monopoly that won’t be easily overcome. The chip-making machines ASML makes require a high level of skill, so it isn’t easy for any new competitors to come along and take away market share.

The company’s extreme ultraviolet lithography (EUV) technology and the complexity and cost associated with developing such machines have kept competitors such as Canon and Nikon far behind.

In the third quarter, sales totaled €7.52 billion ($8.78 billion), up 0.7% year over year, with EPS rising 3.8% to €5.48. It also reported a gross profit margin of 51.6%, helped by EUV adoption gaining momentum. 

ASML raised its dividend from the third quarter’s earnings to €1.60 from €1.52 a year earlier, and the yield on the dividend is about 0.75%. The shares are up more than 45% this year and have increased by more than 142% over the past five years.

It’s a relatively expensive stock on this list as it is trading at around 36 times earnings, but considering its share growth and near monopoly, that’s probably a steal.

There are some clouds on the horizon for next year, though, which may affect the share price. While the company said it doesn’t expect sales next year to fall from this year, it warned that in China it sees weaker demand next year; therefore, sales will “decline significantly” in that market compared to a very strong showing in 2024 and 2025.

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2. Carlisle Companies: Finding growth through acquisitions

Carlisle Companies (NYSE: CSL) continues to grow through acquisitions, including two so far this year: the February purchase of expanded polystyrene insulation manufacturer ThermaFoam, and the June purchase of Bonded Logic, a maker of denim insulation. 

While the shares are down more than 13% so far this year, they have gained nearly 130% over the past five years. The Dividend Aristocrat has raised its dividend for 48 consecutive years, and in 2024, it raised its quarterly dividend by 17.6% to $1, delivering a yield of around 1.4%.

In terms of valuation, it trades for less than 18 times earnings, representing potentially good value.

In the third quarter, Carlisle reported revenue of $1.3 billion, rising 1% year over year, but EPS fell to $4.97 from $5.30 a year earlier. EPS, adjusted for one-off items, fell 2.9% to $5.61.

The company may have an advantage over competitors going forward because it will be little affected by the Trump administration’s tariffs, with 90% of its products made in North America, and 90% of its sales there as well.

Management revised down its 2025 guidance. It now expects flat revenue compared to 2024, with an adjusted EBITDA margin decline of 250 basis points, but remaining in the

Previously, management predicted low single-digit revenue growth, and an adjusted EBITDA margin decline of 150 basis points. 

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3. Greenbrier Companies: Solid transportation stock to ride out tariff concerns

The shares in Greenbrier Companies (NYSE: GBX) are down more than 25% this year, but are up by nearly 40% over the past five years. The attractive stock is trading at less than seven times earnings.

The railcar manufacturer has paid a dividend for 46 consecutive quarters, including a 6.7% boost to $1.28 in fiscal 2025 from the year before, delivering a yield of around 3%.

The company is in a strong position with a railcar backlog, 16,600 units worth $2.2 billion. In the 2025 fiscal year that ended Aug. 31 , it had revenue of $3.24 billion, compared with $3.55 billion in the previous fiscal year, due to lower railcar deliveries, and factory closures as the company overhauls its European business.

Full-year EPS was $6.35, which included $0.24 per share European facility-related rationalization costs, compared to $4.96 a year earlier. Core EPS, which strips out one-off items, was a record $6.59.

Greenbrier is seeing the benefits from expanded business in Mexico as well as cost reductions in its Leasing & Fleet Management segment.

Looking at those numbers, the stock’s tumble this year may seem overdone. However, in the 2026 fiscal year, the company said it expects revenue to be between $2.7 and $3.2, slightly down from the 2025 fiscal year.

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4. M&T Bank: Careful growth with a dependable dividend

M&T Bank (NYSE: MTB) has maintained steady, disciplined growth while boosting shareholder value. It has raised its dividend for nine consecutive years, with a current yield of around 3.23%. There is room for more dividend increases, though, as the payout ratio is around 38%.

The stock has slid less than 2% this year, but is up nearly 60% over the past five years. Even so, it represents good value, trading for just under 12 times earnings.

In the third quarter, the lender reported EPS of $4.24, up 13.7% year over year. Revenue rose 5.4% to $2.53 billion. The company supported its share price by spending $409 million on buying back its own shares, after spending $1.1 billion in the previous quarter, and $662 million in the first quarter on repurchases. 

The lender’s growth appears to be stable across the board, with loans, deposits and borrowings all rising above the year-earlier quarter. M&T Bank is known for its dependability and conservative fiscal approach. It was only one of two banks in the S&P 500 that didn’t trim its dividend during the housing crash of the late 2000s.

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5. O’Reilly Automotive: Great deal, solid growth

O’Reilly Automotive (NASDAQ: ORLY) benefits from the rising costs of new and used cars because it means people are holding onto their vehicles longer, necessitating the need for more repairs. O’Reilly’s stock is up more than 23% this year and more than 210% over the past five years.

In the third quarter, the retailer had revenue of $4.71 billion, rising 8% year over year, while statutory EPS climbed 12% to $0.85. What’s impressive is that the company’s comparable same-store sales rose 5.6% year over year. 

Based on those results, the company boosted its forecasts for the year, saying it expects full-year revenue of between $17.6 and $17.8 up from $16.7 billion in 2024, and yearly EPS of between $2.90 and $3.00, compared to $2.71 in 2024.

The stock is trading at around 34 times earnings. Even though it doesn’t deliver a dividend, it has been investor friendly in terms of stock buybacks. In the first six months of 2025, it has bought back $1.60 billion worth of its own shares.

One concern, however, is how much the cost of tariffs will affect the company’s price competitiveness and ability to manage its supply chain.

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6. Parker-Hannifin: Growth fueled through acquisitions with improved profitability

Parker-Hannifin (NYSE: PH) continues to find growth through acquisitions. It has recently said it plans to purchase Curtis Instruments in a $1 billion all-cash offer.

Curtis makes motor speed controllers, instrumentation, power conversion and input devices that dovetail with Parker’s businesses in electric vehicle motors, hydraulic and electrification technologies. Curtis is expected to deliver $320 million this year in revenue.

In the third quarter, while revenue fell 9% year over year to $4.96 billion, the company became more profitable with EPS of $7.37, rising 33% from the same period last year.

For the full year, the company is predicting revenue to grow 1% while EPS is expected to land between $25.92 and $26.12, compared to $25.44 in fiscal 2024.

One of the best things about Parker-Hannifin is its dividend, which it has increased for 69 consecutive years, including a 10% boost this year to $1.80 a share, equaling a yield of around 0.98%. The yield would be higher except that Parker Hannifin’s shares have risen more than 14% this year and more than 300% over the past five years.

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7. Seagate Technology: Data storage needs drive company’s fortunes

Seagate Technologies (NASDAQ: STX) has seen its shares rise more than 70% this year, and more than 220% over the past five years. The company’s HAMR technology is expected to be in demand thanks to the surge in need for high-capacity storage in hyperscale data centers, AI training workloads and decentralized edge environments.

In fiscal year 2025, the data storage company had revenue of $9.1 billion, up 38.8% from the previous fiscal year, and EPS of $6.77, up 328%. Fourth-quarter revenue was $2.4 billion, up 29.5% year over year, while EPS fell 6% to $2.24.

In the first quarter of 2026, Seagate said it expected $2.5 billion in revenue, give or take $150 million, and non-GAAP EPS of $2.30, plus or minus $0.20.

The so-so forecast bothered some investors as the company had non-GAAP EPS of $2.49 in the fourth quarter. However, on the positive side, Seagate said it’s seeing little impact yet from tariffs.

The company raised its quarterly dividend last year by 2.8% to $0.72. The yield is an above-average 1.95%.

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8. Williams Companies: Growing pipelines, growing profits 

Williams Companies (NYSE: WMB) operates more than 33,000 miles of natural gas pipelines across 24 states, as well as deepwater Gulf natural gas and crude oil services.

The need for greener energy means that natural gas will likely be in greater demand and the company stands to benefit from that growth. Its shares are up more than 6% this year, and more than 209% over the past five years. 

The company has shown dependable growth with 37 consecutive quarters of meeting or beating Wall Street analysts’ adjusted EBITDA estimates. In the first quarter, that figure rose by 2.8% year over year to $1.99 billion. Net income was $690 million, or $0.56 in EPS, rising 9% and 8%.

It reported available funds from operations (AFFO) of $1.45 billion, down from $1.51 billion in the first quarter of 2024. The driver for improved EPS was a combination of its recently commissioned Transco projects and Crowheart upstream operations.

The company cited its new investment in Cogentrix Energy to raise its adjusted EBITDA full-year guidance by $50 million to $7.7 billion for the year. 

Quarterly dividend grew 5.3% this year to $0.50, and yields 3.38%. Williams has increased its dividend for eight consecutive years. 

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9. ASE Technology Holdings: Crucial player in the chipmaking sector

ASE Technology Holdings (NYSE: ASX) provides front-end outsourced packaging, testing, and electronic services to semiconductor manufacturers and, due to this, is a pick-and-shovel stock. The company should benefit from demand for leading-edge technology and the recovery in the semiconductor market.

While tariffs are a short-term concern, the company should benefit from long-term trends. Its shares are down more than 1% this year, but up more 83% over the past five years.

ASE Technology Holdings posted second-quarter revenue of TWD $150,750 million (USD $5.04 billion), up 7.5% year over year. EPS was  TWD $1.70, down 2.8% from the same period last year.

The company has an attractive annual dividend that yields roughly 3.83%. It has shown steady revenue growth, roughly 7% over the past five years, and has a low (0.72) debt-to-equity level. Its packaging operations account for 49% of its revenue, with electronics manufacturing services responsible for 39%, and testing operations bringing in 11% of revenue. 

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10. Lincoln Electric Holdings: Growth through acquisitions

The shares in Lincoln Electric (NASDAQ: LECO) have climbed more than 31% this year, and more than 169% over the past five years. The US welding company has been able to grow through strategic acquisitions, including three last year.

This year, the company is purchasing the remaining 65% of Alloy Steel Australia, as Lincoln already owns 35% of that company.

In the second quarter, the company reported sales of $1.09 billion, up 6.6% year over year, while EPS jumped 44.6% to $2.56. The rise of automated production facilities dovetails nicely with Lincoln’s portfolio of automated welding technology. 

Lincoln raised its quarterly dividend by 5% this year to $0.75, equaling a yield of 1.23%. More importantly, it has raised its dividend for 30 consecutive years.

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Comparing these top defensive stocks

View our 10 top picks, their year-to-date performance and price to earnings (P/E) ratio in an easy-to-compare format.

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What attributes do defensive stocks have?

Defensive stocks are issued by companies with stable earnings and consistent returns, even during an economic downturn, because they sell essential goods and services that people need regardless of the economic climate.

Here’s a breakdown of what makes these stocks dependable and recession-proof:

1. Predictable and stable earnings This includes consistent revenue and profit streams. They often have a long history of generating strong cash flow year after year, which makes their earnings predictable. They’re not chasing explosive, short-term growth but rather focusing on steady, consistent execution. The Williams Companies, for example, have had 37 consecutive quarters of meeting or beating consensus estimates for adjusted EBITDA.
2. Strong financial health A dependable stock will have a solid balance sheet. Key indicators include debt level. They are often self-funding, meaning they make capital investments from their own profits rather than relying on external borrowing. ASE Technology Holdings, for example, has a debt-to-equity ratio of 0.72. M&T Bank’s conservative fiscal approach has helped it weather past economic storms.
3. Strong competitive advantages (economic moat): These companies often have a sustainable competitive advantage that protects their market share from competitors. This could be due to a strong brand, superior customer service, or a dominant position in the market. ASML operates, for example, as a virtual monopoly while Seagate Technology’s HAMR technology is difficult to replicate.
4. Consistent dividend payments Many dependable stocks pay regular dividends to shareholders. The most reliable ones have a long track record of not just paying dividends, but consistently increasing them over time. This is a strong signal of its financial health and management’s confidence in the future.
5. A healthy dividend payout ratio (the percentage of earnings paid out as dividends) indicates the dividend is sustainable. Parker-Hannifin has managed to grow its dividend for 69 consecutive years while the Greenbrier Companies has raised its dividend for 45 consecutive years. Lincoln Electric Holdings has grown its dividend for 30 years in a row.
6. Low volatility These stocks don’t experience the wild price swings of more speculative investments. While they may not see massive gains during a bull market, they tend to hold up better during market downturns, acting as a “protective shield” for your portfolio. This stability makes them a good choice for risk-averse investors and those seeking to preserve capital.

In essence, a defensive stock is a well-run, mature business that provides a consistent and essential product or service, has a strong financial position, and rewards its shareholders with a steady, reliable return.

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Pros and cons of defensive stocks

Defensive stocks offer stability and consistent returns, particularly during economic downturns, but they typically provide lower growth potential compared to the overall market during periods of expansion. Let’s go through some of the advantages and disadvantages of holding them.

Pros 

• Stability and lower volatility: Defensive stocks are known for their resilience and stable performance, even during recessions or market volatility. This is because companies in sectors like utilities, consumer staples, and healthcare provide products people need all the time (e.g., electricity, food, medicine).
• Steady dividend payments: Many defensive stocks are from established, mature companies with a history of paying consistent dividends. This provides a reliable income stream for investors, which can be especially appealing for retirees or those seeking steady cash flow.
• Protection against economic downturns: When the economy is struggling, these stocks tend to outperform the broader market. They act as a “defensive shield” for a portfolio, helping to limit losses when other, more cyclical stocks are falling.

Cons 

• Lower growth potential: While they provide stability, defensive stocks are typically not high-growth investments. When the economy is strong, they tend to underperform compared to cyclical stocks that benefit from increased consumer spending and economic expansion.
• Potential for overvaluation: Because of their reputation for stability, defensive stocks can become overvalued during market downturns as many investors rush to buy them as a safe haven. This can lead to a lower rate of return for those who buy at inflated prices.
• Sector-specific risks: Even defensive sectors have their own risks. For example, utilities are often heavily regulated, and healthcare companies face challenges from new technology and competition. Regulatory changes or industry disruptions can impact their performance.

A summary of the benefits and drawbacks of investing in defensive stocks

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Why are good industrial defensive stocks often undervalued?

Many of the stocks in our list of defensives are industrial stocks, e.g., Greenbrier Companies and Parker Hannifin. That’s because we were looking for stocks that were not overvalued and that’s often the case with industrials. There are several reasons why many investors overlook good industrial stocks, even when they have strong fundamentals and a history of reliable performance. This can create opportunities for savvy, long-term investors. Here’s a look at why this happens:

1. Lack of “glamour” and media attention

The industrial sector, which includes everything from aerospace and defense to heavy machinery and logistics, isn’t as “sexy” as technology or consumer-facing sectors. Companies that make jet engines, construction equipment, or waste management services simply don’t generate the same level of excitement and media buzz as the latest social media platform, AI startup, or electric vehicle company.

• Technology is a narrative-driven sector: Tech companies often have compelling stories about innovation, disruption, and changing the world. This narrative attracts a lot of media coverage, retail investor interest, and a premium valuation.
• Industrials are about the “boring” stuff: While crucial to the economy, industrial companies are often business-to-business (B2B) enterprises. Their products and services are not consumer-facing, so they don’t have the same brand recognition or public profile.

2. Focus on growth vs. value

The market’s attention, particularly in recent years, has been heavily concentrated on high-growth, high-multiple stocks. Investors are often willing to pay a premium for companies that promise rapid future growth, even if they have little to no current profitability.

• Industrial stocks are often “value stocks”: They tend to have lower price-to-earnings (P/E) ratios, strong cash flow, and pay consistent dividends. They appeal to investors who are focused on a company’s current financial health rather than speculative future growth.
• Limited analyst coverage: Many smaller industrial companies, in particular, may have limited or no coverage from Wall Street analysts, which means they are not on the radar of many institutional or retail investors.

4. Complexity and lack of understanding

Industrial companies can be complex. Their business models often involve intricate supply chains and specialized technologies. It can be more challenging for an everyday investor to understand a company that makes complex machinery or provides specialized logistics services compared to one that sells consumer products. As a result, many investors stick to what they know and avoid these sectors.

Despite being overlooked, many industrial companies are well-run businesses with strong fundamentals, competitive advantages, and a history of creating shareholder value through consistent dividends and smart capital allocation. For a patient, long-term investor, this lack of market attention can present an opportunity to buy these stocks at a reasonable price.

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Alternative ways of investing in defensive stocks

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Trading CFDs on defensive stocks and ETFs

Many brokers, including eToro, will allow you to trade defensive stocks and ETFs via contracts for difference (CFDs), giving traders exposure to these recession-proof investments without owning any of the underlying assets.

Trading these stocks and ETFs through CFDs means betting on their price, without buying these assets. This could be an attractive option for investors seeking to easily liquidate positions.

With CFDs you can bet on rising as well as falling markets. You may also be able to trade CFDs with leverage, a loan from your broker, which may enable you to take a larger position than your deposit. That is, however, risky, as it amplifies your gains as well as your losses. Therefore, it’s only recommended for experienced traders.

Read our educational guide to CFDs to find out more about how they work.

Note: CFD trading is not available in the US.

_{Risk disclaimer: 61% of retail investor accounts lose money when trading CFDs with this provider.}

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FAQs on defensive stocks