2022 has been a year of market corrections. As of this writing, the S&P/TSX Composite Index is down by 10.48% from its 52-week high. The Canadian benchmark index’s weakness characterizes a downturn in the entire Canadian equity market. As a new investor, it might be difficult to understand how to put your money to work in the stock market without taking on unnecessary risk.
It is essential to remember that stock market investing is inherently risky. During market downturns, the risk to your investment capital at work in the stock market becomes even more pronounced. Times like these demand making safer bets if you want to invest in the stock market. The stock of well-capitalized and industry-leading publicly traded companies can be good investments to consider.
Market downturns drive down share prices for stocks across the board. It can also drive down industry-leading stocks with wide enough economic moats to levels that can make them arguably undervalued stocks.
Canada’s banking and telecommunications industries boast some of the strongest publicly traded companies in the country. Today, we’ll look at leaders in both industries to help you consider your options among the two sectors of the Canadian economy.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is a $184.94 billion market capitalization giant in the Canadian financial services industry. The biggest among the Big Six Canadian banks, this Toronto-based multinational financial services company is also a major presence in the global banking sector.
A dividend-paying stock of the highest order, the company has shown its ability to weather economic crises time and time again over the decades.
RBC stock generated more than $16 billion in earnings for fiscal 2021. Despite a challenging year for the economy in 2022, it looks set to deliver stellar results this year as well. The bank generates revenue from several banking segments from markets around the world.
The steep rise in borrowing costs and economic uncertainty might impact its investment banking and wealth management segments. However, it has a strong enough capital position to ride the wave of uncertainty.
As of this writing, Royal Bank of Canada stock trades for $132.32 per share and boasts a 3.87% dividend yield. It appears oversold and might be a strong bet to consider.
BCE
BCE (TSX:BCE) is Canada’s industry leader in the telecommunications industry. The $56.72 billion market capitalization telecom company is the biggest of the three major Canadian telecom giants, enjoying a strong position in its industry by a wide margin.
The need to communicate is critical in an increasingly interconnected world, and BCE is responsible for providing that ability to millions of Canadians. It is a defensive business that can arguably weather even the worst economic downturns due to the essential nature of its business.
Despite weakness in the broader market, BCE stock continues to deliver solid earnings results. Its third-quarter earnings report for fiscal 2023 saw its operating revenue grow by 3.2% year over year, and its adjusted net earnings grew by 7.1% in the same period. Its free cash flow soared by 13.4% to hit $642 million.
The company’s management is confident that it will meet its full-year financial guidance for the year, and it also announced a new share buy-back program that will see it repurchase up to a 10th of its outstanding stock over the next year.
As of this writing, BCE stock trades for $61.96 per share and boasts a juicy 5.94% dividend yield. Down by 16.37% from its 52-week high, BCE stock can be an excellent addition to your portfolio.
Foolish takeaway
At current levels, both industry-leading TSX stocks look too cheap to ignore and deserve a place in self-directed portfolios. If I had to choose one, I would go with BCE stock purely because of its higher dividend yield and the slightly more defensive nature of its industry amid worsening macroeconomic conditions.
