While inflation is easing in North America, it still poses a big problem in Europe. The recession odds are increasing day by day, which will fuel the market volatility further. However, there are some TSX stocks that could stand tall even in the case of an economic downturn and turbulent markets. Here are three such stocks.
Canadian utility Fortis (TSX:FTS) is one great name if you are looking for stability. Its slow-but-stable earnings growth facilitates regularly growing dividends. This setting plays well in almost all kinds of markets. FTS has outperformed in many of the previous bear markets, mainly due to its stable dividends and less volatile stock.
Utility stocks have surged higher as the interest rate hike cycle might end this year. FTS stock has soared 10% so far this year and currently yields 4%. Its long dividend growth streak highlights management’s confidence in its future earnings growth and indicates payout reliability.
As interest rates will stabilize later this year, bonds will likely lose their sheen and substitutes – utilities – will be in the limelight. Fortis’ stable dividend growth and slow-moving stock will be key advantages if markets take an ugly turn from here.
Canadian Natural Resources
I’m bullish on crude oil and think the country’s biggest energy producer Canadian Natural Resources (TSX:CNQ) is an appealing bet in the space. While the volatility in this case could be higher than the utility stock discussed above, CNQ’s stable dividend profile makes it stand tall in current markets. It currently yields 4.4%.
CNQ has increased shareholder payouts for the last 23 consecutive years. That’s quite an uncommon feat in a risky upstream energy industry. It even kept dividends growing during the pandemic when almost the entire sector backpedaled and trimmed payouts.
CNQ stock has returned 350% since the pandemic and offers a stable dividend profile. It has a scale and high asset quality that play well even at low energy prices.
CNQ has seen rapid free cash flow growth in the last couple of years. Higher oil prices and production could repeat the trend this year as well. Its growth prospects and superior balance sheet will likely unlock more shareholder value this year.
Like utilities, telecom companies have stable earnings and dividend profiles. Stable demand for their services, even during an economic downturn, makes their financials relatively stable. Canadian telecom giant BCE (TSX:BCE) is an apt name ahead of impending turbulent times.
In the last decade, BCE grew its net earnings by 3%, compounded annually. Even if that looks unexciting, it has fuelled regular dividend and capital growth. BCE stock currently yields 6%, the highest in the industry.
BCE has been aggressively investing in its network infrastructure for the last few years. This might help increase the subscriber base and market share ahead of its 5G expansion. Note that BCE has the strongest balance sheet in the industry, which could drive more capital expenditure and growth.
Even if BCE is a slow-moving name, it offers essential stability and consistent dividends. It will likely play well if the large swings persist in broader markets.