With the TSX hitting new record highs, an economy that remains less than impressive, still high consumer debt, and global economic concerns, it is a good idea to look to the more defensive stocks to make your investment portfolio, whether it be your RRSP or your TFSA, more resilient.
When a downturn hits, we don’t want to be caught off guard, which is why it’s a good idea to remain diversified while adjusting your exposures as the situation warrants.
At this time, a more defensive stance may be warranted, so consider adding the following two defensive stocks to protect your RRSP or your TFSA from falling markets.
Loblaw Companies Ltd. (TSX:L)
Loblaw stock has really rallied in the last six months and is up 28% from its 2018 lows.
Loblaw stock has been paying investors a growing annual dividend, which has grown at a 10-year compound annual growth rate of 3.5%, and is currently at $1.18 per share for a dividend yield of 1.81%.
So it’s not a huge yield, but it’s a steady and consistent one.
Loblaw has successfully used its scale in order to drive operating efficiencies and to drive value for the consumer, driving a three-year annual EPS growth rate of over 12%, and accelerating sales and margin improvements — this at a time of heightened competitive pressures and a rapid emergence of e-commerce disruption.
Loblaw will be reporting next week, and investors should look for the pace of food inflation and Loblaw’s ability to continue to leverage its scale for operating efficiencies.
Maple Leaf Foods Inc. (TSX:MFI)
Maple Leaf has been creating shareholder value for a long time now, and after a disappointing third quarter, this is still a great long-term buying opportunity.
In fact, the stock’s 10-year return is a healthy 267%, and the company’s history has been of increasing profitability, increasing dividends (+175% growth in dividends over the last three years), and share buybacks, all of these creating shareholder value.
The company has built a national brand, and continues to focus on cost cutting, expanding its geographic footprint, and with cash on its balance sheet, the company is able to do so while continuing to return cash to shareholders.
Maple Leaf Foods has done such a good job that EBITDA margins were more than doubled since 2006, and going forward, the target EBITDA margin target has been increased to 14% to 16% from the prior 10%.
This leading consumer protein company will continue to innovate with new product offerings and acquisitions, driving strong, consistent growth in its $3 billion revenue base.
Maple Leaf Foods will also report next week, and although the company has accelerated its expansion and therefore spending plans, we should expect the company to continue to execute on its long-term goals.
In closing, these defensive stocks have a proven history of shareholder value creation, so for investors who are looking for truly defensive stocks, Loblaw and Maple Leaf Foods are great options.
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Fool contributor Karen Thomas has no position in any of the stocks mentioned.