Defensive Stock
A stock that tends to maintain relatively stable earnings and dividends regardless of the state of the overall economy.
What is Defensive Stock?
A defensive stock is a share of a company that provides consistent revenues and earnings across different phases of the economic cycle because it sells products or services that consumers need regardless of economic conditions. Classic defensive sectors include utilities, healthcare, consumer staples (food, beverages, household products), and telecommunications. Defensive stocks typically have lower earnings volatility than the broader market, pay steady dividends, and experience smaller drawdowns during recessions. In return, they often underperform during economic booms when cyclical stocks surge. Defensive stocks are a core holding in income-oriented and risk-averse portfolios.
Example
During the 2022 equity bear market, the S&P 500 declined roughly 19% while the consumer staples sector fell only about 4% and utilities dropped approximately 1%. Companies like Procter & Gamble and Costco held their value because consumers continued buying toothpaste, detergent, and groceries even as discretionary spending contracted — illustrating the defensive quality of essential goods companies.
Source: Investopedia — Defensive Stock