Just when the outlook for 2020 couldn’t look any worse, along comes the return of one of the biggest stressors of 2019. The spat between the U.S. and China – Canada’s two largest trading partners – helped pave the way for the market crash. The slowdown in demand, the ratcheting of recession fears, and the lowering of oil prices were all exacerbated by U.S.-China tensions.
Those tensions are coming back home to roost now. Hong Kong unrest, tech concerns, and the coronavirus itself are all causing discontent between the two nations. The announcement from the White House on Thursday that a China press conference would shortly be forthcoming helped wiped the day’s gains off the U.S. stock markets.
A potential renewal of Sino-American tension must now be factored into the uncertainty already battering the markets. Stock investors wary of a repeat of the market crash would therefore be wise to begin combing through portfolios for dead wood and stocking up on defensive names.
Defensive dividend stocks are the order of the day
Conan O’Brien recently tweeted, “Troubling thought: What if these are the good old days?” It’s a compelling question. The amount of economic stressors amassing on the horizon certainly suggest that it’s time to load up on defensive stocks.
For a solid five-stock “knuckle sandwich” of defensive heavyweights, consider adding NorthWest Healthcare REIT, Fortis, Loblaw, BCE, and Manulife Financial. All five of these stocks are well suited to the current market and offer opportunities for years of relatively low stress wealth creation.
Fortis is a go-to buy with four-and-a-half decades of dividend stability under its belt and a sturdy 3.6% yield. Utilities are one of the most essential areas of the Canadian economy, matched only by consumer staples. Speaking of which, Loblaw is a sturdy addition to a portfolio and a 1.85% yield. The retail empire’s reliable dividend is fed by strong consumer demand for essential products, including food and medical supplies.
NorthWest’s dividend yield weighs in at around 8% at its current valuation. It’s a strong play for long-term rent-driven revenues in the healthcare space, which makes it a solid buy for investors eyeing a drawn-out pandemic. That meaty yield also satisfies investment strategies built around narrow financial horizons. As such, NorthWest is a rare defensive REIT worthy of a retirement savings plan, for instance.
Manulife and BCE round out this five-stock mini portfolio with the country’s biggest insurance name and a hefty telco with a third of the market share. Manulife has suffered somewhat of late, down 25% in three months. However, this only makes its long-term value buy thesis all the stronger. Investors should consider buying now to lock in a juicy 6.5% dividend yield in this essential business.
BCE is one of those names that manages to bring together revenue from two very different sources equally well. As a play on interconnectivity – a must during the pandemic lockdown – BCE delivers the goods.
However, it’s also a key player in home entertainment. A 5.8% yield completes the picture of a near-perfect stock.
