2 Defensive Dividend Stocks That Should Be on Your Radar

Canadians should buy Telus (TSX:T)(NYSE:TU) and another defensive dividend stock if they’re looking to combat a rise in volatility.

| More on:
edit Safety First illustration

Image source: Getty Images

With the TSX Index marching steadily towards new highs, now seems like a decent time to play some defence with some of Canada’s top defensive dividend stocks.

In this piece, we’ll have a look at two names that should help your portfolio stay above water should the markets be hit with an unexpected typhoon later in the year. Of course, the following names probably won’t be the best picks if the markets go without a correction for another year or two, but at the very least, you’ll have peace of mind and a solid dividend to collect every quarter.

Without further ado, consider the following:


Telus (TSX:T)(NYSE:TU) is a telecom top dog that really impressed in 2020. When the tides were turned against it, Telus rose the occasion, continuing to take share over its peers on the west coast, despite the industry-wide pressure. Such outperformance is no coincidence. The incredible managers running the show are the real deal, and I think they’re worth paying up for as we move into the next generation of 5G wireless technology.

The company is aggressively rolling out new infrastructure, just like its peers are doing. But with a proven reputation of quality, I think the firm has a great foundation to retain subscribers while going after new customers with aggressive promos. Telus is in an enviable spot, and I think it’s well equipped to continue outpacing its two brothers in the Big Three.

The valuation seems steep, with shares recently touching down with a new all-time high just shy of $29. With a better growth profile and a reputation for outperformance, I prefer Telus over its competitors for investors seeking to play defence in today’s calm but unnerving market.

TD Bank

TD Bank (TSX:TD)(NYSE:TD) is a premium bank that lacks the premium multiple at the time of writing. The stock sports a 3.7% yield alongside a 11 times trailing earnings multiple. Not at all a high price to pay for Canada’s most U.S.-centric bank. Over the next three years, I think TD stock is bound to pull ahead of its peers to command a price-to-earnings multiple north of 13. Why? Interest rates will inevitably rise, and once it does, TD’s retail banking businesses will have a lot to gain on the margin front.

Moreover, I’ve mentioned in numerous prior pieces that I’m a big fan of U.S. banking at this juncture for the surging amount of consumer debt being raised. In Canada, debt loads are already high, so I do see more room for TD to profit from increasing amounts of consumer debt in the U.S.

On the flip side, TD’s Canadian banking business may be more secure from the rise of fintech disruptors. Undoubtedly, the Canadian border has proved to be quite a barrier to entry for various U.S.-based fintech disruptors, including PayPal‘s Venmo. In due time, I think fintech firms will make their way into Canada. But in the meantime, I view Canadian banks as having a ridiculously wide moat.

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 Joey Frenette owns shares of TORONTO-DOMINION BANK. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool recommends TELUS CORPORATION and recommends the following options: long January 2022 $75 calls on PayPal Holdings.

More on Investing

food restaurants

If I Could Only Buy 1 TSX Stock for the Next 10 Years, This Would Be It

Here's why Restaurant Brands (TSX:QSR) remains my top pick on the TSX for long-term investors seeking excellent total returns.

Read more »

data analyze research
Bank Stocks

The 1 Canadian Bank Stock I’m Watching This Week

Bank of Montreal (TSX:BMO) stock is starting to look dirt-cheap after its post-earnings fumble.

Read more »


The Best Stock to Invest $1,000 in Right Now

Cineplex has emerged from the pandemic riddled with debt but also with a stronger underlying business and stock that grossly…

Read more »

Golden crown on a red velvet background
Dividend Stocks

3 Top Dividend Stocks to Start a Growing Passive Income Stream

Start a growing passive income stream with shares like Canadian Utilities that boast five decades of dividend growth.

Read more »

Stocks for Beginners

3 Growth Stocks Wall Street Might be Sleeping On, But I’m Not

These growth stocks have more than doubled in the last year, yet there could certainly be more growth on the…

Read more »

diamonds, hidden gems

2 Undervalued Gems to Watch in March 2024

Value stocks such as Air Canada and Exchange Income trade at a compelling discount to consensus price target estimates.

Read more »

TFSA and coins
Dividend Stocks

TFSA Investors: Where to Put $7,000 in 2024

These top TSX dividend stocks now offer yields near 8%.

Read more »

Coworkers standing near a wall
Energy Stocks

3 Things About Enbridge Stock Every Smart Investor Knows

Enbridge stock (TSX:ENB) continues to be one of the best dividend stocks out there, but with a payout ratio of…

Read more »