Rising inflation and aggressive rate-hike cycles by central banks shook global stock markets in 2022. The Bank of Canada raised its policy rates seven times last year and for the eighth time since March 2022 on January 26, 2023. Higher interest rates are the latest tremor to hit the financial markets, and their impact on stocks is severe, because it drives prices lower.
Expect the turbulence to continue, as the Feds hold tight until they can bring inflation down. Also, rates typically rises when the economy enters recovery. However, when recovery gets going, the market should follow and rebound. Meanwhile, investors can mitigate risks by sticking to industry leaders from the banking, energy, and communications services sectors.
Royal Bank of Canada (TSX:RY), Enbridge (TSX:ENB), and BCE (TSX:BCE) are stable giants that can handle market tremors. The share prices could drop, but each will keep investors whole on dividend payments.
Resilient as ever
RBC underperformed last year due to harsh market conditions. Total revenue and net income in fiscal 2022 declined 1.4% and 1.5% year over year to $48.9 billion and $15.8 billion, respectively. Still, its president and chief executive officer (CEO) Dave McKay said the results reflect a resilient bank well positioned to pursue strategic growth and deliver long-term shareholder value.
According to McKay, RBC’s premium businesses, strong balance sheet, prudent risk management and diversified business model are competitive advantages. While he acknowledged a higher tail risk in the current environment, RBC rolled out a 2% discount to its dividend-reinvestment plan to increase its capital buffer for uncertainty.
At $136.55 per share (+8.32% year to date), RBC’s dividend offer is 3.82%. The quarterly dividends are super safe, given the 44.85% payout ratio.
Iconic Canadian company
Enbridge is the fourth-largest publicly listed Canadian company by market cap after RBC, Toronto-Dominion Bank, and Canadian National Railway. It’s also one of North America’s largest crude oil and natural gas pipeline operators. The $103.7 billion energy infrastructure company boasts four blue-chip franchises with high visibility to organic growth opportunities.
Its new CEO Greg Ebel said, “Enbridge will continue to be an iconic Canadian company, and increasingly so an iconic North American company.” The conventional energy infrastructure business is still growing while renewable assets expand simultaneously.
Ebel also sees a bright future for liquids natural gas (LNG) and a promising opportunity for carbon-capture developments. You get real value for money at $51.25 per share (-1.55% year to date) and from the mouth-watering 6.89% dividend yield.
Dividend grower
BCE is a no-brainer buy for being Canada’s largest communications company. Its market cap is $55.5 billion, and investors delight in the dividend-growth model. The annual common share dividend has increased by 5% or higher for 15 consecutive quarters since the fourth quarter of 2008.
The 5G stock trades at $60.93 per share (+2.42% year to date) and pays a hefty 6.33% dividend. BCE plans to continue investing in the future of the business and maintain a strong balance sheet liquidity, and generate substantial cash flows every year. No wonder BCE is a widely held TSX stock.
Market heavyweights
RBC, Enbridge, and BCE are heavyweights and market movers. They have no protection from market volatility, but their businesses can endure and overcome economic downturns.
