The Motley Fool

Beta Boosters: 2 Stocks to Prepare for a Market Correction

With markets at all-time highs, investors are left wondering when a market correction is on its way. Therefore, investors may be looking to add more defensive stocks to prep for market uncertainty.  Fortunately, for risk-adverse investors, there is a metric available to measure the risk and volatility of a particular stock compared to the market, which is known as beta.

Although the calculation of a stock’s beta is complicated, the application of this metric is quite simple. If a stock has a beta of one, the stock’s price rises or falls in line with the general market. If the stock has a beta of 0.5, the stock will fluctuate at half the rate of the market. However, if the stock has a beta of two, the stock price will fluctuate at twice the rate of the market.

With this in mind, investors with a low risk tolerance should be looking for solid companies with low betas. Telus Corporation (TSX:T)(NYSE:TU) and Enercare Inc. (TSX:ECI) are two low-beta companies with sustainable dividend yields.

Telus Corporation

Telus is the second-largest telecommunications provider in Canada. Telus’s greatest strength is its focus on the broadband and wireless services. In today’s society, customers continue to use more and more data, and the demand for wireless services is high. Instead of investing its excess cash into TV content and cable bundles, Telus is putting its money into a service that continues to grow.

With a beta of 0.58 and few competitors in the industry, Telus is a safe play with an expected market correction coming. With the highest dividend-growth rate among the Canadian telecoms, expect Telus to maintain and grow its current yield of 4.3% regardless of large swings in the market.

Enercare Inc.

Enercare is one of the largest providers of water heaters, furnaces, air conditioners, and other related services in North America. Enercare is an attractive investment because of the industry in which it operates. There will always be a need for air conditioning, furnaces, and water heaters, and younger generations would rather pay for these services than try to fix issues themselves.

In addition, the company generates steady and consistent cash flows through its growing rental services. Therefore, the company’s current yield of 4.9% is sustainable, and investors can expect the company to continue its streak of dividend increases for five years running.

By providing a service people need and having a beta of 0.29, investors are positioning themselves well for a market correction by adding Enercare to their portfolios.

Foolish bottom line

Here at the Fool, we keep a long-term perspective and try not to get caught up in short-term swings in the market. However, if you’re looking to continue to add to your portfolio, these low-beta stocks provide some security in uncertain times.

Fool on!

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Adviser Iain Butler and his team at Stock Advisor Canada are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Click here to find out how you can get instant access!

Fool contributor Colin Beck has no position in any stocks mentioned.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.