Let’s just put it out there: retirees should play it safe in this market. It’s not prudent for them to chase after growth stocks that can suddenly plummet to multi-year lows. These investments need to assure retirees of cash flows so that their purchasing power is not impacted drastically.
It’s advisable for retirees to consider investing in defensive companies that enjoy a wide economic moat and are somewhat recession resistant. Here are three such companies trading on the TSX.
Fortis
Fortis (TSX:FTS)(NYSE:FTS) is one of the largest utility players in North America. It serves more than 3.4 million electricity and gas customers in Canada and the United States. Fortis has stakes in several utilities in the Caribbean as well.
Around 99% of its revenues are regulated, which means Fortis doesn’t have to worry about unpredictable cash flows. The stock sailed through the pandemic, and there’s no reason why it won’t continue to soldier on, even in the current market environment.
The company has increased its dividend every year for 48 straight years. Its guidance says it will increase dividends by 6% through 2025. Fortis will invest $20 billion through 2026, of which $3.8 billion will be in clean energy, and this should help it manage dividend increases.
The stock is already fairly valued, so don’t expect too much capital appreciation. However, you can rest assured knowing that the dividend payout of 3.53% will be coming your way for a long time.
Enbridge
Enbridge (TSX:ENB)(NYSE:ENB) is one of the largest pipeline companies that transport crude oil and natural gas primarily in the North American region. It is one of the most resilient stocks on the TSX. Enbridge’s strong fundamentals allowed it to maintain dividend payouts during the peak of the pandemic when several other energy players suspended these payments.
Enbridge is a Dividend Aristocrat and has raised its dividend at a compound annual growth rate of 10% for the last 26 years. It currently offers a forward dividend yield of 6.31%, making it attractive to income-seeking investors.
Even as the broader TSX has fallen 10.42% in 2022, Enbridge has gained 10.36%. Energy prices are expected to be high in the near term, and that should benefit Enbridge stock, which is currently trading at $54.67 and has an average target price of $60.21, a potential upside of around 10%. Add in the dividend and you could be sitting on decent gains by the end of the year.
Canadian Utilities
Canadian Utilities (TSX:CU) is among the most resilient stocks on the TSX. It is the only Dividend King on the index, having increased its dividends every year for 50 years! Its dividend has grown at a CAGR of 8.13% for the last 10 years.
Canadian Utilities operates in the natural gas space but has interests in electricity and other energy, too. Five utility assets generate a large portion of its earnings, and it doesn’t have to worry about cash flows, because the company has a large, regulated asset base.
Canadian Utilities has a beta of 0.57, which means the stock will be relatively stable, even in a volatile market. The company has a dividend yield of 4.63%, which should keep investors who rely on passive income satisfied until the market situation improves.
