3 Safe Stocks When Interest Rates Are Rising

Canadian investors sweating out the interest rate-tightening cycle may want to target safe stocks like Emera Inc. (TSX:EMA) in 2023.

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This past Tuesday, April 18, Bank of Canada (BoC) governor Tiff Macklem stated that the central bank foresees weak growth for the remainder of the calendar. Barring an unforeseen calamity, Canada is well positioned to avoid a recession in 2023. The BoC has raised interest rates eight times since it committed to its new tightening policy. Now, the benchmark interest rate stands at 4.5%.

Today, I want to look at three safe stocks that are worth holding in the face of this tightening cycle. Let’s jump in.

Why Enbridge is a safe stock as interest rates rise

Enbridge (TSX:ENB) is the first safe stock I’d target in this climate. This is the largest energy infrastructure company in North America. Shares of this safe stock have climbed 4.6% month over month as of early afternoon trading on April 20. The stock is down marginally so far in 2023.

The company released its fourth-quarter (Q4) and full-year fiscal 2022 earnings on February 10, 2023. Enbridge posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $15.5 billion for the full year — up from $14.0 billion in fiscal 2021. Meanwhile, distributable cash flow (DCF) rose to $11.0 billion, or $5.42 per common share, compared to $10.0 billion, or $4.96 per common share, in the previous year.

Shares of Enbridge currently possess a price-to-earnings (P/E) ratio of 41, which puts this energy stock in middling value territory at the time of this writing. This safe stock offers a quarterly dividend of $0.887 per share. That represents a tasty yield of 6.6%.

Utilities are still a dependable target in this environment

Emera (TSX:EMA) is the second safe stock I’d look to purchase in the final days of April 2023. This Halifax-based energy and services company is engaged in the generation, transmission, and distribution of electricity to its customers. Utilities are a good bet for investors looking for stability in this turbulent market. Shares of this safe stock have increased 10% so far in 2023.

This company released its Q4 and full-year fiscal 2022 earnings on February 23. In Q4 2022, Emera reported adjusted earnings per share (EPS) of $0.93 — up from $0.64 in Q4 fiscal 2021. Meanwhile, adjusted EPS for the full year was reported at $3.20 compared to adjusted EPS of $2.81 in the prior year. Emera was powered by improved earnings at Tampa Electric, New Mexico Gas, and Peoples Gas.

Emera last had a favourable P/E ratio of 16 at the time of this writing. Moreover, this safe stock offers a quarterly dividend of $0.69 per share, which represents a solid 4.7% yield.

One more safe stock to snatch up as interest rates increase

Empire Company (TSX:EMP.A) is the third and final safe stock I’d look to snatch up in this interest rate environment. Consumer staples are a great target in this climate, and grocery retailers have been extremely dependent in Canada since the beginning of the COVID-19 pandemic. Shares of this safe stock have climbed a modest 1.3% so far in 2023.

Investors got to see Empire’s Q3 2023 earnings on March 16. It delivered adjusted EPS of $0.64 — down from the $0.77 it posted at the end of Q2 fiscal 2023. However, gross profit jumped 7.9% to $1.90 billion. For the full year, gross profit soared 178% to $5.83 billion.

This safe stock possesses a favourable P/E ratio of 13 at the time of this writing. Moreover, Empire offers a quarterly dividend of $0.165 per share, representing a 1.8% yield.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Emera and Enbridge. The Motley Fool has a disclosure policy.

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