On Wednesday, June 7, the Bank of Canada (BoC) elected to increase the benchmark interest rate by 25 basis points. That brought its benchmark interest rate to 4.75%, the highest interest rate Canadians have experienced since the early 2000s. The BoC responded swiftly to a Statistics Canada report in early May that showed the Canadian economy posted annualized growth of 3.1% in the first quarter of 2023. Policymakers are still wrestling with inflation and a potentially overheated economy, which has spurred action on interest rates. Today, I want to zero in on four safe TSX stocks that you can trust in this interest rate-tightening environment. Let’s jump in.
Here’s why Royal Bank qualifies as a safe TSX stock
Royal Bank (TSX: RY) is the largest financial institution in Canada and the largest TSX stock by overall market cap. When the Canadian economy is humming, there are few equities that have more fingers in the domestic pie than the country’s top bank. Its shares have dropped 3.6% in 2023 as of close on June 8.
This bank and some of its top peers took a hit to its earnings in the second quarter (Q2) of fiscal 2023, as provisions for bad loans soared. Canada’s top banks have experienced improved profit margins in this interest rate-tightening climate. However, this aggressive policy move has also put the squeeze on Canadian consumers and put a cap on credit growth. Despite that, Royal Bank is a profit machine that investors should feel good about for the long haul.
Shares of this TSX stock currently possess a favourable price-to-earnings (P/E) ratio of 12. Moreover, Royal Bank offers a quarterly dividend of $1.35 per share. That represents a solid 4.3% yield.
Why insurance stocks are a solid target as interest rates rise
Manulife Financial (TSX: MFC) is a Toronto-based company that provides financial products and services in North America and around the world. It owes much of its recent growth to its strategy to expand in Asia, which boasts a burgeoning middle-class population. Its shares have jumped 5.6% in the year-to-date period.
Historical trends suggest that insurance companies see an increase in profitability during periods of high interest rates. In Q1 fiscal 2023, Manulife posted core earnings growth of 6% to $1.5 billion. This safe TSX stock last had an attractive P/E ratio of 8.8. Meanwhile, it offers a quarterly dividend of $0.365 per share, which represents a very strong 5.6% yield.
You can trust this TSX stock in a period of uncertainty
Corby Spirit and Wine (TSX: CSW.A) is based in Toronto and manufactures, markets, and imports spirits and wines in Canada, the United States, the United Kingdom, and around the world. Shares of Corby have declined 8.5% month over month as of close on June 8. This TSX stock has plunged 13% in year to date.
The alcohol industry has proven resilient in the face of economic turmoil in the past. That makes Corby Spirit and Wine a solid target right now. In Q1 FY2023, the company delivered case goods sales growth of 5%, while total revenues were largely static compared to the previous year.
This TSX stock possesses a favourable P/E ratio of 16. Moreover, it offers a quarterly dividend of $0.21 per share, representing a 6% yield.
One more safe TSX stock I’d look to snatch up right now
Leon’s Furniture (TSX: LNF) is a Toronto-based company that operates as a retailer of home furnishings, mattresses, appliances, and electronics in Canada. Its shares have dropped 7.5% month over month as of close on June 8. The stock has increased 21% so far in 2023.
Improved economic health has historically benefited manufacturers and sellers of crucial home products like kitchen appliances, vehicles, clothes, and home furnishings. This TSX stock possesses a very favourable P/E ratio of 8.4 at the time of this writing. Moreover, it offers a quarterly distribution of $0.16 per share. That represents a 3% yield.
