Recession Investing Strategies for Canadians

The spectre of a recession should spur Canadians to buy and hold dependable equities like Suncor Energy Inc. (TSX:SU)(NYSE:SU) and others.

| More on:
analyze data

Image source: Getty Images

Many of the world’s foremost economic organizations have raised the spectre of recession when discussing the current paradigm. This decade has already seen investors put in a position to contend with a generational global pandemic, inflation rates not seen in decades, and the largest and potentially most devastating war on European soil since World War II. The head of the World Bank recently warned that it will be hard to avoid a global recession due to these enormous pressures. Indeed, the Russia-Ukraine war has already had a destructive impact on international food supply.

Today, I want to look at investing strategies that Canadians may want to undertake in the face of this uncertainty.

Seek out dependable dividend stocks

Canadian investors can take a practical approach in the face of these pressures and target reliable dividend stocks. These are income-yielding equities that have typically provided a strong history of dividend growth. Investors who are seeking broad exposure may want to snatch up BMO Canadian High Dividend Covered Call ETF (TSX:ZWC).

This exchange-traded fund (ETF) is specifically designed to provide exposure to a dividend focused portfolio. Its shares have increased marginally in 2022 as of close on June 1. It is up 4.1% from the same period in 2021.

Some of the top holdings in this ETF include blue-chip beasts like TD Bank, Enbridge, and BCE. This ETF offers a monthly distribution of $0.10 per share, which represents a tasty 6.2% yield. I’m happy to stash this ETF in the event of a recession.

Stash equities that will be resilient in the face of a recession

Instead of focusing on blue-chip dividend stocks broadly, Canadians may want to snatch up equities that are set up for success, even in the face of economic turbulence. For example, grocery retail is an essential service that is set up to thrive, even during downturns. That is why I’d look to snag a stock like Slate Grocery REIT (TSX:SGR.U). This Toronto-based real estate investment trust owns and operates grocery stores in North America. Its shares have increased 3.2% so far in 2022.

Suncor (TSX:SU)(NYSE:SU) is another stock you can trust, even as we contemplate a potential recession. Oil and gas prices have erupted after Russia’s full-scale invasion of Ukraine in late February. Moreover, the European Union’s recent measures could further restrict the Russian energy sector from global markets. Suncor stock has shot up 56% in 2022 as of close on June 1. Its shares are up 71% from the previous year.

Slate Grocery REIT offers a monthly dividend of $0.072 per share, which represents a monster 7.3% yield. Suncor, however, last paid out a quarterly dividend of $0.47 per share. That represents a 3.6% yield.

Stay on the sidelines with cash

Canadian investors may also want to retreat to the sidelines in the event of a recession. Of course, investors should not endeavour to sit on cash for very long. This can be especially damaging in a high inflation environment like we are currently experiencing. If you are sitting on a lot of cash, that can be a solid near-term solution. However, in the medium and long term, you should look to put that cash to work by snatching up discounted equities.

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 Ambrose O'Callaghan has positions in TORONTO-DOMINION BANK. The Motley Fool recommends Enbridge.

More on Investing

stock analysis
Investing

“GARP” Investing: 3 Can’t-Miss Stocks to Buy Now

goeasy (TSX:GSY) and other low-cost growth stocks could make your portfolio a market beater over the long run!

Read more »

calculate and analyze stock
Investing

My Take: The Best TSX Stock to Buy With $1,000 in March 2024

Here's why Restaurant Brands (TSX:QSR) remains a top TSX stock long-term investors should buy right now.

Read more »

Woman has an idea
Tech Stocks

Prediction: 1 Stock That Could Trounce the Market 

The TSX has been favouring tech stocks, but not this one. However, it has the potential to trounce the market…

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »

Canadian Dollars
Stock Market

Where to Invest $5,000 in April 2024

Do you have some extra cash to spare? Here are five companies to invest $5,000 in next month.

Read more »

Plane on runway, aircraft
Stocks for Beginners

Up 53% From its 52-Week Low, Is Cargojet Stock Still a Buy?

Cargojet (TSX:CJT) stock is up a whopping 53%, nearing closer to 52-week highs from 52-week lows, so what's next for…

Read more »

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »