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Defensive Stocks: Protecting a Portfolio

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Economies worldwide are brimming with uncertainty at the moment. As such, short-term investors are seeking defensive stocks for portfolio protection.

Defensive stocks are typically those which operate in non-cyclical sectors providing essential goods and services. This is because these companies shouldn’t experience large negative shocks in demand, even with a very tight economy.

Of course, over a long investment horizon, these stocks tend to lag behind traditional blue-chip stocks. Quite simply, these stocks don’t generate the same levels of growth and expansion.

However, what they lack in exciting growth, they make up for in safety and stability. So, during these times, investors with a shorter horizon might opt for more defensive stocks.

Today, we’ll look at two such TSX stocks that can offer portfolio protection during uncertain times.


Dollarama (TSX:DOL) is the largest Canadian chain of dollar stores. It has well over 1,000 locations across the country, with Ontario being the province with the most stores.

DOL’s defensive stock characteristics have been on full display with recent market turbulence. It’s one of the rare stocks that’s up instead of down year to date.

The logic behind DOL’s performance is quite simple. While not a full-fledged grocery or department store, it does carry a wide range of household goods at cut-rate prices.

No matter how bad the economy gets, people need to get their essentials consistently. So, it makes sense that this defensive stock would continue to do solid business.

In its most recent earnings report, the company reported year-over-year quarterly revenue growth of 2%, which comes during a time that many companies are reporting negative growth.

One of the drawbacks with DOL is its lack of a dividend yield. As of this writing, the stock is trading at $45.67 and yielding 0.39%.

So, while investors might be able to outperform the broader market in the short term, the lack of a yield makes it tough for DOL to keep up over the medium or long term.


Loblaw (TSX:L) is Canada’s largest grocery and pharmacy retailer. It operates numerous grocery stores under various banners, and on top of in-store pharmacies it also runs the widely popular Shoppers Drug Mart chain.

As with DOL, L has shown its resiliency in the face of adversity. As of this writing, this defensive stock is also up year-to-date and recently posted a year-over-year quarterly revenue growth of a whopping 10.7%.

Once again, no matter how dire the economic situation, people need to get essential food and medication. This defensive stock has been able to fill that need for Canadians, and as such it’s been able to drive growth during these tough times.

Unlike with DOL, L offers investors a bit more of a palatable yield. As of this writing, L is trading at $67.38 and yielding 1.87%.

While that yield won’t knock anyone’s socks off, it still gives investors some income in the short term while they ride out the tough market.

Defensive stock strategy

Both DOL and L make for great additions to a defensive stock investing plan. These stocks have shown their resiliency during tough times and produced growth in a very tight economy.

While neither of these stocks will generate massive total returns over the long run, investors seeking portfolio protection in the near term can certainly hang their hats on DOL and L.

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Fool contributor Jared Seguin has no position in any of the stocks mentioned.

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