7 Defensive Stocks to Shield Your Portfolio from Inflation

As of early 2025, Walmart Inc. (NYSE: WMT) stock has delivered a total return of 158.61% over the five years. That’s 93% higher than the S&P 500  delivered over that same period.  

The company continues to meet the needs of its core customers by offering everyday low prices on essential items. At the same time, Walmart is appealing to higher-income shoppers seeking to stretch their discretionary spending.

But this isn’t just a demand story. Walmart is actively leveraging the digital economy through its Walmart+ app, positioning itself as a key player in e-commerce. To support this shift, the company is adopting automation and artificial intelligence (AI) to enhance efficiency and streamline its operations.

Another way that WMT stock can help you profit from inflation is through its growing dividend. Walmart is a Dividend King that has increased its dividend for 52 consecutive years.  

If inflation trends higher, rising oil prices are likely to be a key driver. Although oil prices have remained range-bound since 2022, many analysts predict that crude oil prices could reach or exceed $100 per barrel between 2025 and 2030, citing a resurgent global economy and geopolitical concerns as factors that will boost global demand. 

That means oil stocks should be on your radar, and Occidental Petroleum Co. (NYSE: OXY) is one of the top names to consider. Beyond the potential for higher oil prices, the company's strong cash flow—which has accelerated even with oil prices trading in a distinct range—is a compelling reason to invest. Occidental has also shown its commitment to shareholders by using this cash flow for share repurchases, providing direct value to investors. 

That undoubtedly caught the attention of Warren Buffett, who made Occidental Petroleum one of his preferred stocks over the last five years. And OXY stock has become more attractive as a defensive play since it began increasing its dividend after cutting it sharply in 2020.  

Pharmaceutical stocks are solid defensive stocks at any time. However, the case for Eli Lilly and Company (NYSE: LLY) has an additional tailwind: its blockbuster GLP-1 products Mounjaro and Zepbound.  

Mounjaro is a groundbreaking treatment for Type-2 diabetes, and Zepbound is Eli Lilly’s entry into the booming obesity treatment market. Individuals may cut back on many things if inflation heats up, but they will always make room for their prescriptions. That’s particularly true of both Mounjaro and Zepbound, which patients need to continue taking to maintain the benefits.  

Through the third quarter of the company’s 2024 fiscal year, Eli Lilly has generated a non-GAAP gross margin of 83%, which is higher than the sector average. And the company has a deep pipeline of products, including in the critical area of oncology, that will continue to help grow revenue and earnings well into the future. LLY stock also pays a dividend, which it has increased for 11 consecutive years.

Merck & Co. Inc. (NYSE: MRK) is another inflation-fighting stock in the pharmaceutical sector. The bullish narrative with Merck centers around its oncology portfolio and its flagship drug, Keytruda, which continues to be approved for earlier-stage cancers and is experiencing robust global demand from metastatic indications.  

However, Keytruda is only one drug in the company’s extensive oncology portfolio, which is supposed to grow from $10 billion in 2023 to over $20 billion by 2030.  

Beyond oncology, Merck has a solid track record of developing innovative medicines covering vaccines, infectious diseases, immunology, and other unmet medical needs. The company has a proven track record of bringing drugs to market while being able to produce solid returns for shareholders. One element of those returns is a dividend that yields over 3.3%, has an average annual growth rate of around 5%, and has been increasing for 14 consecutive years.  

Next up on this list of inflation-resistant stocks is Mondelez International Inc. (NASDAQ: MDLZ). While Mondelez is best known as the parent company of beloved chocolate brands like Cadbury and Toblerone, its appeal goes beyond a simple "everybody loves chocolate" story.

One reason investors should be bullish on Mondelez is that its portfolio of products is less dependent on cocoa prices compared to competitors like The Hershey Company (NYSE: HSY), which Mondelez made an offer to acquire in 2024.  

Mondelez has a global footprint, selling its products in over 150 countries. Its portfolio includes household names like Oreo cookies, Ritz crackers, and CLIF bars, forming the cornerstone of a go-to-market strategy crafted by its CEO. This lineup of iconic brands gives Mondelez pricing power, enabling it to navigate inflationary pressures effectively.

And Mondelez uses its earnings to reward shareholders through share buybacks and a dividend that has increased for 13 consecutive years. 

Food is one area where consumers tend to feel inflation directly. It will also be one of the last areas for inflation to ease its grip. But McCormick & Company Inc. (NYSE: MKC) remains an attractive stock to consider regardless of the direction inflation takes. 

The reason is that “food” doesn’t just mean food you prepare at home. Since 2022, inflation-weary consumers have been in a tug-of-war between eating out versus eating at home. At first, it didn’t matter as consumers were just ready to get back to their pre-pandemic routine. But restaurants have raised their prices, and many consumers are swiftly making the pivot back to a home-cooked meal. 

McCormick benefited from this trend in 2020 as consumers had to restock their neglected spice drawers. And that doesn’t even count the company’s recent acquisitions, which include Frank’s Red Hot and Cholula.   

MKC stock is a Dividend Aristocrat, having increased its dividend for 38 consecutive years. That dividend currently has a yield of 2.45%.  

Last, but certainly not least, inflation-busting stock on our list is consumer staples giant Kimberly-Clark Co. (NYSE: KMB). An oft-mentioned comment that bears repeating is that at any given time, you probably have several Kimberly-Clark products in your home. The brand’s portfolio is that broad-reaching.  

And that portfolio—including names such as Huggies diapers and Kleenex tissues—comes with pricing power. That pricing power shows up on the company’s bottom line, which has continued to show year-over-year growth despite the impact of inflation on consumers. Additionally, the company continues to increase its free cash flow and pay down its debt.  

Those are the attributes of a “forever” stock, but it’s also one that investors can buy for growth in the coming years. Investors are also buying a Dividend King that currently has a yield of 4.03%. Plus KMB stock trades at around 17.4x forward earnings, a slight discount to the Consumer Staples sector average of 20.5x.