2 TSX Stocks to Buy If You’re Worried About a Recession

Loblaw and NWC stock are among the defensive dividend stocks that may not make you rich, but they can help you stay rich and build your wealth over time.

| More on:
Two hands holding champagne glasses toasting each other with Paris in the background

Image source: Getty Images.

A recession is just around the corner, with some pundits expecting it to happen in the second half. Indeed, the autumn season could be a chilly one for stock investors. Still, I don’t think Canadian investors have to worry.

Remember, the markets have seen this recession coming from a country mile away. Though there may still be more pain ahead, it ultimately comes down to how the current slate of expectations stacks up against actual results.

It’s unclear as to whether the earnings hit will be modest and if the ensuing recovery will be sharp. I’d personally temper my expectations. However, I wouldn’t pass up the many market bargains that exist right now. Like it or not, the stock market will always be unpredictable.

Recessions are never good for stock returns. However, the effect tends to be baked into valuations quite quickly. Sometimes, too much bearishness can be factored in before the recession “storm” finally does hit.

The calm before the recession

As the calm before the storms sets in, investors should look to be selective and insist on deeper value and larger margins of safety to minimize the chance of losses while improving one’s shot at better above-average results.

It’s never a bad idea to play a bit of defence, especially if valuations haven’t been driven up to the moon by panicked investors. After a hot start to 2023, with tech (and other battered plays) leading the way, I think it’s defensive stocks that are being neglected as others chase the gains to be had in a rally off 2022’s lows.,

If you’re not willing to follow the herd back into the tech trade, I think it’s wise to zig while others zag by getting back into the defensive dividend stocks before the next scary event sends shivers down investors’ spines!

At this juncture, I like the grocers. They’ve been unstoppable of late and could fare well as the recession happens.

Loblaw

Loblaw (TSX:L) saw its CEO get grilled over the record profitability of Canada’s top grocer retailers. Undoubtedly, profiteering and greedflation have been the terms associated with the top grocery plays. Despite the questionable headlines, I remain a raging bull on the grocers, especially Loblaw, which has flexed its private-label muscles of late.

The stock’s at a fresh new high of nearly $127 per share. Loblaw president Galen Weston received a $1.2 million raise for his performance. Whether or not it’s warranted, I still view Loblaw stock as a recession fighter for any portfolio.

The stock goes for 22 times trailing price-to-earnings (P/E), with a 1.29% dividend yield. With a 0.06 beta (nearly no correlation to the market averages), L stock is a nice shelter from any storm you see coming.

North West Company

North West (TSX:NWC) is a lesser-known retailer that’s flirting with new highs. The stock is cheaper than Loblaw, with a larger dividend yield.

At writing, shares go for 16 times trailing P/E, with a 3.82% dividend yield. For those unfamiliar with the firm, it’s a retailer specializing in serving remote areas in the continent’s northwest region.

Retail is a tough place to thrive in. There’s tonnes of competition. North West has found a niche within the industry, and it excelled. I expect more outperformance from the firm as it looks to expand its multiple into a recession.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends North West. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Ready to Invest With $5,000? 3 Stocks for July 2024

Are you ready to invest in stocks that can provide growth and income for decades? Here are three options for…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

Here’s the Average TFSA Balance at Age 41 in Canada

The average TFSA balance at age 41 is lower than the cumulative contribution room, but it’s never too late to…

Read more »

money cash dividends
Dividend Stocks

2 Top TSX Dividend Stocks to Own for Passive Income

These great Canadian dividend stocks now offer high yields.

Read more »

Dividend Stocks

2 Dividend Stocks That Could Create $1,000 in Passive Income in 2024

Are you building your passive-income portfolio? Invest $10,000 and get a $1,000 annual payout in 12 monthly installments starting August…

Read more »

Payday ringed on a calendar
Dividend Stocks

How to Use a TFSA to Earn $250 Per Month in Tax-Free Passive Income

TFSA investors can consider holding dividend stocks such as Mullen Group in the registered account for passive income.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Passive Income: 2 Stocks to Buy and Never Sell

A TFSA portfolio built with solid dividend stocks that promise decades of stable payouts can be an indispensable passive-income source.

Read more »

Family relationship with bond and care
Dividend Stocks

Invest in These TSX Stocks Now and Retire With Peace of Mind

Canadian stocks like Brookfield Asset Management (TSX:BAM) offer long term investment potential.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Passive Income: 4 Stocks to Buy and Never Sell

These four TSX dividend stocks could boost your passive income.

Read more »