What could be a safe investment if TSX stocks crash from here? The companies that can generate stable earnings, even in an economic downturn, will be considered safe. The stable earnings will facilitate regular dividends, which will create a stream of passive income for investors.
I will cover three such TSX stocks that seem well placed in these critical times and can act as hedges against a market crash.
Top TSX stocks: Kirkland Lake Gold
Physical gold prices have been rallying for the last few months, and the trend is expected to continue. One TSX stock to play the gold’s bullish outlook is top miner Kirkland Lake Gold (TSX:KL)(NYSE:KL).
The stock has soared more than 40% in the last 12 months, largely underperforming other gold miners. That’s why the stock looks relatively attractive from the valuation standpoint and indicates room for more growth.
Higher realized gold prices during the first quarter will help this mining company expand its earnings. Increased production and diminishing costs have especially improved Kirkland Lake’s margins in the last few years.
Increased economic uncertainty and volatile broader markets might continue to force investors to the traditional safe haven — gold. Improved earnings and rallying gold prices might drive Kirkland Lake stock further up.
Kirkland Lake stock is trading at $58.8 at writing, almost 15% lower than its 52-week high. While peers have already breached their 52-week highs, this gold miner will also likely race to its highs amid rallying gold prices.
Top TSX stocks: Dollarama
As earlier stated, stocks or companies with stable earnings growth even when the economy gets ugly could be the top bets in such volatile times. Dollarama (TSX:DOL) is one such TSX stock; it has been quite resilient during the COVID-19 market crash.
This retailer runs over 1,000 locations across Canada and has operations in every province. Its stores were declared essentials, so the lockdowns had little impact on its quarterly earnings.
Dollarama stock has surged more than 4%, while the TSX Index has fallen 12% in the last 12 months. The stock looks to be trading at a premium compared to peers and to its historical average valuation as well. However, given the uncertainty in the broader markets, investors might continue to switch to defensive stocks such as Dollarama.
The stock is trading around $42.8 at writing, almost 20% lower than its 52-week high. The stock could soon surge to these levels given investors’ flight to safety.
Top TSX stocks: TransAlta Renewables
TransAlta Renewables (TSX:RNW) is a $4 billion renewable power company. It is the largest wind power generator in the country and also has operations in the U.S. and Australia.
What’s striking about TransAlta Renewables stock is its juicy dividend yield. It offers a yield of 6.3% at the moment, much higher than TSX stocks at large. RNW pays monthly dividends. If one invests $50,000 in RNW stock, they will receive $270 per month in dividends in 2020.
TransAlta not only offers stable dividends, but the stock looks strong for the future as well. As the world is slowly moving away from fossil fuels to renewables, TransAlta stock looks well placed for long-term growth.
It has shown a sharp bounce back recently, gaining almost 32% in just over a month. The stock might keep its momentum going when the company plans to report first-quarter earnings next week.
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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 Vineet Kulkarni has no position in any of the stocks mentioned.