1 Defensive Industry and 1 Defensive Company Equals 2 Top Ideas

Bausch Health Companies Inc. (TSX:BHC)(NYSE:BHC) and Intact Financial Corporation (TSX:IFC) each have their own unique, defensive qualities investors can turn to.

| More on:
Light bulb with jester hat perched on top

Image source: Getty Images

If all the market volatility is making you nervous, consider the following two relatively defensive stocks in order to stabilize your mind and your portfolio.

With a one-year stock return of 90%, Bausch Health Companies (TSX:BHC)(NYSE:BHC) has truly come a long way since its days that many investors would like to forget, when it was formerly known as Valeant Pharmaceuticals.

This week’s earnings release was another building block added to the tower of investor trust and confidence, as third quarter 2018 results were, once again, better than expected.

But while the healthcare industry is a defensive industry benefiting from stable, long-term growth, this stock continues to be a comeback story, with many hurdles still left to be faced — hurdles such as the company’s oversized debt burden and legal issues.

The debt level remains extremely high at $24.3 billion, but it is being worked down, and the company remains the subject of various legal investigations related to pricing and accounting, but these are being resolved.

If the planned new product launches in 2019 go as planned, and the debt continues to be worked down, this will serve to reduce the risk inherent in this stock, and it will increase investor confidence in the upside potential once again.

With a 2.71% dividend yield, Intact Financial (TSX:IFC) offers investors stable income as well as significant potential capital appreciation.

Intact Financial is the largest provider of property and casualty (P&C) insurance in Canada with a market share of almost 20%.

The Canadian P&C industry is a mature market, and, accordingly, Intact has grown mostly through acquisitions to the leading position it has today, with approximately $10 billion in direct premiums written and a $15 billion investment portfolio.

With a successful acquisition history, which has given the company scale and size to drive down costs and bring up returns, Intact recently ventured into the U.S. with the acquisition of U.S. specialty insurer OneBeacon Insurance Group Ltd. for $2.3 billion. The acquisition is expected to generate top- and bottom-line growth opportunities from broader geographic and business mix diversification.

Intact offers investors a defensive, reliable, high-quality name that has a proven history of value creation.

Looking to the future, investors have much to be excited about.

Intact plans to continue to leverage its strong balance sheet to continue to be a consolidator in the P&C insurance industry. The company continues to target acquisitions of $500 million or more in direct premiums written, with an acquisition target internal rate of return of 15%

Its balance sheet remains strong with a debt-to-cap ratio of under 23%.

Management expects that 15-20% market share will change hands in the next five years. And given that barriers to entry are high in this business, this leaves Intact well positioned to continue to be the consolidator in Canada and the U.S.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas has no position in any of the stocks mentioned. The Motley Fool owns shares of Bausch Health Companies. Intact Financial is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Man making notes on graphs and charts
Dividend Stocks

Recession Stocks for Beginners

Recession-proof opportunities like Shaw Communications (TSX:SJR.B)(NYSE:SJR) should be on your watch list.

Read more »

protect, safe, trust
Dividend Stocks

1 Dividend Stock Yielding 8.98% Offering Stable Income

This dividend stock on the TSX today offers investors a chance at over $4,000 in returns over the next year…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Passive Income: 2 Dividend Stocks Yielding About 4-5% to Buy Now

These discounted dividend stocks should provide market-beating passive income and total returns with below-average risk in the long run.

Read more »

Woman has an idea
Dividend Stocks

2 Ways to Fight the Record-High Inflation

Investing allows you to grow your savings faster than inflation can deplete them, and different types of investments offer various…

Read more »

Couple relaxing on a beach in front of a sunset
Dividend Stocks

3 Dividend Stocks I Plan on Buying This Summer

Are you on the hunt for new dividend stocks to add to your portfolio? Here are three stocks I plan…

Read more »

Dividend Stocks

Real Estate Prices Finally Soften: Buy These 2 REITs?

Two recovering REITs should attract investors if real estate prices continue to soften and the central bank raises interest rate…

Read more »

data analyze research
Dividend Stocks

The 3 Most Traded Stocks on the TSX

These three most traded TSX stocks might give you an idea of where big investors’ money has been flowing lately.

Read more »

Payday ringed on a calendar
Dividend Stocks

Earn a Monthly Income of $260 From These 3 REITs

REITs are ideal for creating a monthly passive-income stream, because they have the right distribution frequency and usually offer healthy…

Read more »