The stock market is ripe for a pullback, and that has some investors wondering which companies are most likely to hold up reasonably well during a downturn.
Let’s take look at BCE Inc. (TSX:BCE)(NYSE:BCE) and Fortis Inc. (TSX:FTS) to see if one is a better pick.
BCE
BCE has transformed itself from a boring, old telephone company to a media and communications giant.
The addition of sports team, a television network, specialty channels, radio stations, and retail operations ensure the company has its hand in the Canadian consumers’ pocket as often as possible. In fact, when you combine the media holdings with BCE’s extensive wireline and wireless networks, you get a business that interacts with most Canadians on a weekly, if not daily, basis.
Think about it. Every time a Canadian sends a text, checks e-mail, downloads a movie, listens to the weather report, calls a friend, or watches the news, the odds are pretty good that BCE is involved somewhere along the line.
That’s a powerful business with a dominant position in a market that is relatively unaffected by global financial upheaval. As a result, BCE tends to be one of the stocks that investors turn to when the market gets ugly.
The stock isn’t cheap, but it still offers a yield of 4.6%, and it’s one of the top names to buy if you tend to lose sleep worrying about the next financial disaster.
Fortis
Fortis owns electricity generation and natural gas distribution assets in Canada, the United States, and the Caribbean.
Over the years, the company has grown through strategic acquisitions, and that trend continues today.
Fortis is in the process of buying ITC Holdings Corp., the largest independent transmission company in the United States. The US$11.3 billion deal initially had the market concerned the company might be biting off more than it can chew, but investors have since warmed up to the acquisition.
Fortis generates 94% of its revenue from regulated assets. That’s an attractive business during times of financial uncertainty, and it’s a big reason the company has such an impressive history of dividend growth.
How impressive?
Fortis has increased the dividend every year for more than four decades. Management just raised the payout by nearly 7% and said it plans to hike the distribution by at least 6% per year through 2021. The stock currently yields 3.9%.
People still have to turn on the lights, heat their homes, and cook their dinner regardless of the state of the economy, so demand for this company’s services should be recession resistant.
Is one a better bet?
Both stocks tend to hold up reasonably well when the broader market decides to pull back. If you simply want the best yield, go with BCE. If you prefer strong exposure to the U.S. and a clearly defined dividend growth plan, Fortis might be the better pick today.
