3 Safe Ways to Play This Panic-Stricken Market

Stop gambling! This herd of cash cows, including Emera (TSX:EMA), can help build your wealth the prudent way.

Hi there, Fools. I’m back again to highlight three companies that generate boatloads of cash flow. As a quick reminder, I do this because cash flow is used by management teams for shareholder-friendly moves such as:

  • paying hefty dividends for income-seeking investors;
  • buying back shares at depressed prices; and
  • growing the business without having to take on too much debt.

While speculating on cash-burning weed stocks can be profitable over the near term, buying into high-quality cash producers remains the most prudent path to wealth.

So if you’re looking for a way to defend against the sharp downturn, this list might be a good place to start.

IT factor

Leading off our list is IT services specialist CGI Group (TSX: GIB.A)(NYSE: GIB), which has generated $1.6 billion in operating cash flow over the past 12 months.

CGI shares have actually rallied nicely over the past month, giving momentum investors a rare opportunity. Specifically, the company’s capital-light business model, wide geographic reach, and diversified services mix continue to fuel market-thumping results.

In the most recent quarter, for example, EPS of $1.26 topped expectations by $0.03 as revenue improved 2% to $3.1 billion. CGI also ended the quarter with an impressive backlog of $23 billion.

“Our diversified mix of critical services, vertical markets and multiple geographies helped, and is helping, mitigate the impact of COVID-19 on client demand,” said CEO George Schnindler. “The pandemic has created unprecedented business conditions and I am proud of our members’ ongoing commitment to ensuring service continuity for CGI clients in a safe and flexible manner.”

CGI shares are up about 20% over the past month.

Electric opportunity

With $1.5 billion in trailing 12- month cash flow, electricity giant Emera (TSX: EMA) is the next cash cow on our list.

Emera shares have also held up quite well during this crash, suggesting that it’s a recession-proof business worth betting on. Specifically, the company’s scale advantages (assets worth $30 billion), well-backed dividend, and diverse base of customers should continue to limit its long-term downside.

Despite weak operating conditions, Emera’s utilities delivered double-digit earnings growth in 2019. Looking ahead, management continues to expect solid earnings and cash flow growth over the long term.

“The underlying financial performance of our business was strong in 2019, with our utilities delivering 10% earnings growth year over year,” said CEO Scott Balfour. “In 2020, we look forward to the closing of the Emera Maine transaction, and redeploying capital from our asset sales into our businesses which are driving a rate base growth forecast of 7% through to 2022.”

Emera shares are up about 6% over the past month.

Fresh choice

Rounding out our list is food giant George Weston (TSX: WN), which has generated operating cash flow of $4.6 billion over the past year.

The stock has trended down slightly over the past few weeks, providing Fools with a decent value opportunity. Specifically, George Weston’s long-term investment case continues to be backed by a defensive business model, stable cash flows, and consistently growing dividends.

Earlier this week, the company posted EPS of $1.55 as revenue increased 10% to $12.3 billion. To be sure, management is withdrawing its 2020 outlook until there’s more clarity on its situation.

“Looking ahead, each of our businesses is set to deliver long-term value creation from a position of operational strength and with a solid financial foundation when we transition to a new post-pandemic reality,” said CEO Galen Weston.

Shares of George Weston are down about 7% over the past three months.

The bottom line

There you have it, Fools: three “cash cows” worth considering.

As always, they aren’t formal recommendations. Instead, see them as a starting point for further research. Even the most stable cash generators can suffer setbacks, so plenty of your own due diligence is still required.

Fool on.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool recommends CGI GROUP INC CL A SV.

More on Investing

An investor uses a tablet
Bank Stocks

Brokerage Account Basics: What Canadian Beginners Should Look For

New to investing in Canada? Learn to compare brokerage fees, pick a TFSA, RRSP or FHSA, and see why Royal…

Read more »

Metals
Energy Stocks

What Happens Next After Ottawa’s Deadline for Stelco

Stelco's owner has defended its layoffs, but Ottawa's deadline doesn't automatically settle the jobs dispute or the investment case.

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Stocks for Beginners

Canada Lost 68,000 Jobs in September: The October 28 Rate Call Just Got Harder

September's job losses complicate the rate decision, while Scotiabank shows why borrowers' relief and bank earnings aren't the same thing.

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

Diesel Is Running Short Worldwide: The Canadian Refiner Cashing In

Suncor's refining margins show how tight fuel supplies can support cash, while a modest dividend yield keeps expectations realistic.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Structure My $14,000 TFSA for Constant Income

If you have $14,000 saved in your TFSA, here is one easy investment strategy to earn $50 of tax-free monthly…

Read more »

telehealth stocks
Tech Stocks

1 Canadian Stock Down 42% to Buy and Hold Forever

This health tech stock is trading at a discount as it continues to grow and expand a business very much…

Read more »

woman looks at iPhone
Dividend Stocks

I’m Not Selling Telus After the 55% Dividend Cut: Here’s Why

Contrary to what the market seems to be saying, Telus Corporation (TSX: T) still has a lot going for it.…

Read more »

monthly calendar with clock
Dividend Stocks

A No-Nonsense 3.7% Dividend Stock That Can Pay Retirees Monthly

This no-nonsense dividend stock has returned more than $3.4 billion to shareholders through dividends since 2013.

Read more »