A previously introduced partitioning of the molecular one-electron density matrix over atoms and bonds [D. Vanfleteren et al., J. Chem. Phys. 133, 231103 (2010)] is investigated in detail. Orthogonal projection operators are used to define atomic subspaces, as in Natural Population Analysis. The orthogonal projection operators are constructed with a recursive scheme. These operators are chemically relevant and obey a stockholder principle, familiar from the Hirshfeld-I partitioning of the electron density. The stockholder principle is extended to density matrices, where the orthogonal projectors are considered to be atomic fractions of the summed contributions. All calculations are performed as matrix manipulations in one-electron Hilbert space. Mathematical proofs and numerical evidence concerning this recursive scheme are provided in the present paper. The advantages associated with the use of these stockholder projection operators are examined with respect to covalent bond orders, bond polarization, and transferability.