The COVID-19 virus has another variant spreading worldwide, and it is raising concerns for economies that were recovering after a tough period. The S&P/TSX Composite Index plunged by over 5% on Thanksgiving. At writing, the Canadian benchmark index has recovered by almost 2% from its December 1, 2021, levels. However, many investors might rightfully be worried about a deeper pullback coming soon.
If you’re scared of a market pullback, it might be time to double down on your safer bets and prepare your portfolio to mitigate capital risk if a market crash happens. Today, I will discuss two top TSX stocks that you should consider owning during a market downturn to diversify into defensive assets for your investment portfolio.
Fortis (TSX:FTS)(NYSE:FTS) is as safe as it gets if you are looking for ways to protect your investment capital during a market downturn. The $27.15 billion market capitalization utility holdings company has 10 utility businesses operating in Canada, the U.S., and the Caribbean.
It provides natural gas and electric utility services to around 3.4 million customers. Fortis generates most of its revenues through long-term contracted and highly rate-regulated assets, virtually guaranteeing predictable cash flows.
Many investors consider Fortis a bond proxy due to its reliable shareholder dividends. At writing, Fortis stock is trading for $57.25 per share, and it boasts a 3.74% dividend yield. The Canadian Dividend Aristocrat boasts a 48-year dividend-growth streak, and it looks well positioned to continue delivering dividend hikes in the coming years.
BCE (TSX:BCE)(NYSE:BCE) is a $60.19 billion market capitalization giant in Canada’s telecom industry. Canada’s telecom sector has been the most defensive industry throughout the pandemic due to the essential nature of the services it provides.
Telecom companies like BCE can continue generating stable revenues regardless of what happens in the broader economy, making them ideal defensive assets to own during a downturn. As its 5G services expand, BCE could generate even greater returns in the coming years.
At writing, BCE stock is trading for $66.23 per share, and it boasts a juicy 5.28% dividend yield. Adding its shares to your investment portfolio could help you generate significant returns through its shareholder dividends alone. The stock is up by 20.46% year to date, and it could provide you with more wealth growth through further capital gains in 2022 and beyond.
When market downturns occur, most equity securities on the stock market tend to decline. However, a few TSX stocks tend to remain firm due to the essential nature of the services these companies provide.
If you are worried about a pullback impacting your investment capital, consider investing in Fortis stock and BCE stock. These two companies can outperform the broader market if it tumbles and continue providing you with returns through capital gains and shareholder dividends when the stock market is doing well.