The Canadian economy is officially in a “technical” recession. That sounds scarier than it really is, but the market tends to be more emotional than reasonable these days, so we have to ride out some of this short-term silliness.
Having said that, the recent volatility is a good reminder that every balanced portfolio should have some defensive names as a hedge against uncertain times.
Here are the reasons why I think Progressive Waste Solutions Ltd. (TSX:BIN)(NYSE:BIN) and Fortis Inc. (TSX:FTS) are solid picks right now.
Progressive Waste
Progressive is a waste management company that provides garbage and recycling collection services to residential and industrial clients in Canada and the United States. The company also owns and operates landfill sites.
The garbage collection business can be quite competitive, but Progressive is investing heavily in new technology to give it an edge.
The company is in the process of converting its fleet of trucks to run on natural gas, and recently completed a project at one of its landfill sites where it is converting methane to natural gas. Just imagine the savings if the company could one day fuel its fleet for free.
Progressive just increased its dividend by more than 6% and plans to buy back up to 10 million shares. That’s the kind of news investors want to hear when economic times are tough.
The stock is holding up well in the broader pullback, and currently trades for a reasonable 19 times forward earnings.
Investors can comfortably buy this stock and simply forget about it for the next 10 years.
Fortis
Fortis owns and operates electricity generation and natural gas distribution assets in Canada, the U.S., and the Caribbean.
Last year the company spent $4 billion to purchase Arizona-based UNS Energy. The acquisition is already contributing to earnings and adds a significant source of U.S.–based revenue.
Fortis recently reported adjusted Q2 2015 earnings of $0.44 per share, a solid increase over the $0.30 the company earned during the same period last year.
The stock is attractive because the company gets 93% of its revenue from regulated assets. This provides investors with reliable and predictable cash flow, and is a big reason why Fortis has been able to increase its dividend every year for more than four decades.
During a recession, people might cut back on restaurant meals or nights out at the movies, but they still have to turn on the lights and heat the house.
