Primo Water (TSX:PRMW): Is it a Good Buy?

Primo Water (TSX:PRMW) is a top defensive stock to buy and hold, whether in a recessionary or inflationary market environment.

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Canada has been in the grips of high inflation rates for the past several months. Canadians saw a massive one-month jump in inflation rates between February and March 2022, as inflation rates increased from 5.7% in February to a 31-year high of 6.7% in March 2022. Investors are worried about the impact of such high inflation rates, and there are credible fears of a stock market crash.

Many Canadians tend to take their money out of equity markets during such market environments to protect their investment capital. However, exiting the stock market might be unproductive. Instead of holding your capital as cash, it might be better to invest it in consumer-defensive assets that can continue providing you with wealth growth.

Inflationary markets like the one we are facing now can devastate the returns of many equity security investments. Fortunately, the TSX boasts many consumer-defensive stocks of companies that can thrive in recessionary and inflationary markets. One such recession-resistant stock has recently announced its plan to release its first-quarter earnings report for fiscal 2022.

Today, I will discuss the stock to help you determine whether it could be a good investment for your portfolio right now.

Primo Water

Primo Water (TSX: PRMW)(NYSE: PRMW) is a $3.01 billion market capitalization pure-play water-providing company. Consumer-defensive assets do not get more essential than a company responsible for providing water to generate revenue. The company’s water solutions ecosystem is anchored by an assortment of water dispensers and a direct water business.

Primo Water generates recurring income by delivering large-format water bottles to residential and commercial customers through its direct water business for use in dispensers. The Tampa, Florida-based company also boasts a network of self-service refill units throughout North America where consumers can refill water bottles themselves.

Primo Water has established itself as a leading provider of sustainable drinking water solutions to customers in North America, Europe, and Israel. The company had a solid start to 2022 with an aggressive buying spree.

The company’s subsidiary Primo Water North America acquired the distributor business of Mountain Valley based in Texas and Clear Mountain Refreshment Services based in Arkansas. Primo Water North America also took over Sip-Well NV, Belgium’s leading water solutions distributor.

Apart from offering its customers access to purified, spring, and mineral water, the company also plays an essential role in reducing pollution and plastic waste through its services.

Foolish takeaway

Primo Water stock trades for $18.79 per share at writing, and it boasts a 1.90% dividend yield. Its share price is up by 8.42% from its March 15, 2022, levels. The company’s first quarter for fiscal 2022 ended on April 2, 2022, and it plans to release its financial results before the markets open on May 12, 2022.

Late last year, the company’s management announced a multi-year step-up in its dividend payouts from 2022 to 2024. It plans to deliver dividend hikes with a compounded annual growth rate of 15%. It could be worth your while to wait for its quarterly earnings release to determine whether it could be a viable investment for you to consider right now.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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