3 Defensive Stocks to Ride Out a Rough Economy

Given their solid underlying businesses, stable cash flows, and impressive track record of dividend hikes, these three defensive stocks can strengthen your portfolios.

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After a tough 2022, global equity markets have made a solid start to this year. Along with signs of easing inflationary pressure, the better-than-expected fourth-quarter gross domestic product of the United States drove the equity markets higher. However, monetary-tightening initiatives by central banks worldwide and ongoing geopolitical tensions are still a concern.

Meanwhile, the following three defensive stocks could help you ride out the uncertain market conditions.


Telecommunication companies are among the safest due to their recurring revenue streams, rising demand due to digitization, and a higher entry barrier for new entrants. So, I have selected Telus (TSX:T) as my first pick. Supported by its capital investments, bundled product offerings, and solid execution, the company added around one million customers in 2022. Meanwhile, the company plans to invest approximately $2.6 billion this year to expand its PureFibre network, accelerate copper-to-fibre migration, and increase its 5G coverage.

The acquisition of LifeWorks in September has strengthened its position in the growing telehealthcare sector. Its other tech-related segment, TELUS Agriculture and Consumer Goods, is growing in double digits amid acquisitions and organic growth. So, the company’s growth prospects look healthy. Meanwhile, Telus’s management has provided optimistic guidance for this year, with its operating revenue projected to grow 11-14%. The management expects its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to grow by 9.5-11% while generating free cash flows of $2 billion.

Telus has also raised its dividends for the last 13 consecutive years and planned to maintain its current dividend-growth program until 2025. Considering all these factors, I believe Telus would be an excellent buy in this uncertain environment.


Fortis (TSX:FTS) is another excellent defensive stock to have in your portfolio. Supported by its regulated, low-risk utility asset base, the company meets the electric and natural gas needs of 3.4 million customers. Meanwhile, the company has delivered an average annual total shareholders return of 11.3% for the last 20 years, outperforming the broader equity market. It has also raised its dividend for 49 consecutive years, while its forward yield stands at 4.05%.

Despite the concerns over rising interest rates and inflation, I believe Fortis is an excellent defensive bet, as it has managed to maintain its operating cost growth rate below inflation for the last five years. The company has planned to grow its rate base at a CAGR (compound annual growth rate) of 6.2% through 2027 with a capital investment of $22.3 billion. The rate base growth could boost its financials in the coming years. Amid its solid underlying business and growth initiatives, the company’s management hopes to raise its dividend by 4-6% annually over the next five years.

Waste Connections

My final pick is Waste Connections (TSX:WCN). Despite the challenging environment, the waste management company grew its 2022 revenue and adjusted EPS (earnings per share) by 17.2% and 18.3%, respectively. Supported by its strong financials, the company delivered 4.8% returns last year, outperforming the broader equity markets. It was the 18th consecutive year of positive shareholder returns.

Meanwhile, given its continued expansion in North America, I expect the uptrend to continue. The company’s management expects its revenue and adjusted EBITDA to grow by 11.6% and 12.6%, respectively. The company also hopes to generate US$1.225 billion of adjusted free cash flows. So, I expect the company, which has also raised its dividends for the last 12 years in double digits to maintain its dividend growth.

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 Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Fortis and TELUS. The Motley Fool has a disclosure policy.

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