The Canadian equity markets have been volatile over the last few weeks amid the fear of rising interest rates due to a resilient economy and strong labour market. The collapse of Silicon Valley Bank has further raised the volatility in the equity markets. In this bearish market, retirees could add the following three companies with solid underlying businesses and stable cash flows to strengthen their portfolios.
Enbridge (TSX:ENB) operates a diversified pipeline network across North America, transporting around 30% of crude oil produced in North America and 20% of natural gas consumed in the United States. It operates a diversified, low-risk, and regulated asset base, with around 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) underpinned by cost-of-service contracts.
About 80% of adjusted EBITDA is inflation indexed, thus protecting against price rises. So, the company’s cash flows are predictable, thus allowing it to raise dividends for the previous 28 consecutive years. It currently pays a quarterly dividend of $0.8875/share, with its yield for the next 12 months at 6.76%.
Meanwhile, Enbridge put around $4 billion of projects into service last year, which could contribute towards this year’s financial growth. It has sanctioned approximately $8 billion of new organic growth capital. Along with these growth initiatives, the growing export of LPG (liquified petroleum products) from North America to Europe amid the ongoing geopolitical tensions could boost the company’s financials in the coming quarters. So, I believe Enbridge is an ideal buy for retirees.
Telus (TSX:T) is another stock with low volatility to have in your portfolio. The essential nature of its business, recurring revenue sources, rising demand, and high entry barriers make the stock an excellent defensive bet. Meanwhile, the company has made an accelerated capital investment of $9.8 billion over the last three years, expanding its TELUS PureFibre infrastructure and 5G network. These investments have allowed the company to connect to more homes and businesses through its fibre-optic infrastructure. Also, the company has expanded its 5G network to cover 83% of Canadians.
Telus acquired LifeWorks in September, strengthening its presence in the telehealthcare sector. Its other segments, Telus International and Telus Agriculture & Consumer Goods, are also growing at an impressive rate. So, the company’s growth prospects look healthy. Meanwhile, Telus has also rewarded its shareholders by raising its dividend for the last 19 years, with its yield for the next 12 months at 5.29%.
My final pick is Fortis (TSX:FTS), which has delivered an average total shareholder return of 11.3% for the last 20 years, outperforming the S&P/TSX Composite Index. With around 93% of its assets involved in the low-risk transmission and distribution of electricity and natural gas, the company’s financials are stable, irrespective of the economic outlook.
Fortis has raised its dividend for the last 49 consecutive years amid its stable financials. Its dividend yield currently stands at a healthy 4.13%. Meanwhile, the company has planned to invest around $22.3 billion in low-risk, regulated assets, expanding its rate base at an annualized rate of 6.2% through 2027. Given its growth prospects, Fortis’s management is optimistic about raising its dividend by 4-6% annually through 2027.
So, considering all these factors, I believe Fortis is an excellent defensive bet.