Over the course of the last year, we’ve seen how devastating it can be for the economy when inflation gets out of hand. There have been many companies across Canada, including some of the top stocks on the TSX that have seen their businesses impacted in one way or another by inflation, which is why so many stocks have lost value since the start of 2022.
Inflation, of course, increases the operating expenses of many companies, which impacts their margins. And at the same time, with consumers forced to spend more of their paychecks on staples and other essential goods and services, many companies are also struggling with the potential for lower revenue as well.
And while inflation has been coming under control in recent months, the potential for a recession to materialize has increased, which has many of the same effects on businesses and consumers as inflation does.
However, not all stocks are seeing such significant impacts as a result of the worsening economic environment. In fact, two top stocks that have actually benefited from inflation and have highly defensive operations are Brookfield Infrastructure Partners (TSX:BIP.UN) and Dollarama (TSX:DOL).
Brookfield Infrastructure is one of the top TSX stocks to buy now
As the economy continues to face several headwinds and many believe a recession could be right around the corner, there’s no question that Brookfield Infrastructure is one of the top TSX stocks to buy now.
While it makes sense to look for safer investments when the economy could be headed for trouble, it can be a risky strategy. Trying to time or predict the market can be very difficult. However, with stocks like Brookfield, you can gain exposure to a defensive business while still owning a company that you’ll be happy to hold in your portfolio for years.
That’s because Brookfield is both a defensive stock and a growth stock. The assets it owns are essential and are, therefore, quite resilient should the economy go into a recession. Furthermore, much of its revenue is indexed to inflation, which is why the stock has benefitted as price levels have been rising.
Moreover, Brookfield has a well-diversified portfolio of assets in different sectors and businesses located all over the world.
Plus, in addition to the many qualities that make it reliable, management is also constantly looking at the potential to recycle capital and reinvest its cash into new opportunities. Therefore, on top of the long-term growth potential that the top TSX stock offers investors, it also pays an attractive distribution that management aims to grow between 5% and 9% each year.
And considering you can currently buy Brookfield while it’s trading off its highs, not only is it slightly undervalued, but the distribution now offers a yield of roughly 4.5%.
Dollarama continues to protect and grow investors’ capital
Another top TSX stock that offers both defensive qualities and impressive long-term growth potential is Dollarama.
Dollarama is a discount retailer and one of the most popular brands in Canada. Therefore, considering consumers love to save money, especially on staples, it’s no surprise that Dollarama is a business that continues to become more popular.
However, as popular as saving money is, it becomes essential when the economy worsens. We’ve seen this over the past year as inflation has surged, and we’ve seen this in the past when there has been a recession.
Therefore, Dollarama is one of the top TSX stocks you can buy in this environment, but it’s also a stock you can plan to hold in your portfolio for years.
On top of the natural growth in sales it’s seeing as a result of the economy, the discount retailer continues to open new stores each month, with the stock targeting between 60 and 70 new stores in fiscal 2024. And over the last decade alone, Dollarama has earned investors a total return of more than 660%.
Therefore, if you’re looking for some of the top TSX stocks you can buy for the long haul but also ones that you can be confident in over the highly uncertain near term, Dollarama is certainly one of the best investments that Canadians can consider today.
