After a massive recovery last year, 2022 has brought a number of challenges for equities. Expected higher interest rates, Russia-Ukraine tensions, and crude oil going bonkers have marred global stocks so far in 2022. Amid the uncertainties, it is better to switch to defensive names that pay stable dividends and protect capital. So, here are three such TSX stocks that could outperform if markets take an uglier from here.
Fortis
Canada’s top utility Fortis (TSX: FTS)(NYSE: FTS) is one classic defensive stock. It has stayed resilient and rather gained as the Russia-Ukraine issue turned bitter in the last few weeks.
Investors turn to such safe havens when the broad market volatility increases. That’s because stocks like Fortis have a low correlation with main indices.
FTS stock has gained 20% since last year. It currently offers a dividend yield of 3.5%, which is in line with TSX stocks at large. The company has kept its dividend streak intact in almost five decades, be it the pandemic or the financial meltdown in 2008.
Through recessions or economic booms, utilities earn stable revenues due to their stable business models. Thus, Fortis has underperformed growth stocks but has notably outfoxed broader markets in the long term.
Its reliable dividends and slow-moving stock make it an appealing bet for conservative investors. And particularly now, when markets are struggling to find a direction, FTS stands tall and offers stability to all kinds of investors.
Algonquin Power & Utilities
Another utility stock that looks attractive right now is Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN). It serves electricity, water and gas to approximately one million customers in North America. Algonquin also has a significant interest in renewables generation with a 3.2 GW capacity.
Interestingly, AQN exhibited superior earnings growth in the last decade, notably beating peers. In addition, it pays a stable dividend of 4.6% and has a long shareholder payment history.
Investors looking to add renewable stock with handsome dividends to their portfolios can consider AQN for the long term.
Enbridge
While high-growth stocks have tumbled significantly this year, one sector that notably outperformed is energy. One name that I particularly like in the current situation is Enbridge (TSX: ENB)(NYSE: ENB). Its juicy dividend yield and rallying crude oil prices uplifting the stock could help it outperform in the near to medium term.
Enbridge earns revenues from the energy commodities shipped from producers to refiners. Its earnings do not move meaningfully on volatile oil prices, as they are based on long-term, fixed-fee contracts.
Moreover, as energy producers are producing more than last year, Enbridge could see increased throughput volumes and thus higher revenues.
ENB stock has been up 15% so far this year. The stock could see more upside as energy markets have been riding higher. It yields 6% at the moment — one of the highest among Canadian bigwigs.
Enbridge will likely increase its dividends by a stable rate, beating inflation for the foreseeable future, which is mainly due to its stable business model.
So, if you are looking for a reliable passive income for the long term, Enbridge should be on top of your watchlist.
