The market is in chaos, and investors are trying to find places to hide. The Canadian economy is once again under fire as oil prices are starting to drop. The Bank of Canada has affirmed some of these fears by insinuating that there are more areas of uncertainty facing the economy than was alluded to only a quarter ago.
Steady, stable sectors are beginning to look attractive once again has been witnessed in the resurgence of dividend stars.
If you’re of these investors looking for safety, it can be comforting to own stocks whose products are in demand no matter the economic cycle. Safe sectors like the utilities, telecoms, and grocers sell goods to people no matter what’s happening in the stock market.
The grocers, in particular, are beginning to look attractive. Everyone needs to eat, so no matter what these stores will continue to sell their goods to hungry customers while providing dividends to starving investors.
Loblaw Companies Ltd. (TSX: L)
You don’t own these companies for double-digit, rocket style growth. No, you own grocers because you know they will be pumping out steady, reliable returns. Loblaw did this again in the third quarter, increasing its revenue by 1.8%.
Adjusted net earnings, after taking into account one-time charges, recorded a year-over-year increase of 2.4% as compared to the same quarter of the previous year.
The company pays a respectable, growing dividend of just under 2% at the current share price. Loblaw increased its dividend by 9.3% earlier this year, continuing a trend of dividend increases that have occurred for several years. The company is not terribly expensive either, trading at a forward price to earnings (P/E) ratio of 13.9 and a price to book of 1.9.
Empire Co. (TSX: EMP.A)
After several years of being in the doghouse following its less-than-stellar integration of Safeway, Empire is beginning to come into its own. The stock had gotten beaten down as far as $16 a share a year ago and has now risen to around $25 a share.
Confidence in Empire has been restored, and value investors who jumped in when the shares were trading below book value have been rewarded.
Like Loblaw, this company is a slow but steady grower. In the latest quarter, Empire increased its revenue by 1.3% over the previous year. Earnings per share increased by 75% over the quarter in part driving the 4.8% increase to the dividend earlier this year. Currently, Empire pays a yield of 1.27%. It is reasonably valued at a forward P/E of 17.5 and a price to book of 1.8.
Stability is key
These companies don’t provide an intense thrill, and they aren’t meant to. These are the companies that you buy to help you make through the tough times — the 700-point drop on the Dow days. It can be comforting to know that at least a portion of your investments are relatively safe when everyone starts running for the hills.
The dividends help bring in some income so that investors can see some return on their investments even as the stock prices whipsaw back and forth. These names are the ones you buy if you want stability. For many people, stability is in high demand these days.
