Smart Moves for Rising Rates: 3 Stocks to Strengthen Your Portfolio

These thress stocks can strengthen your portfolio because the companies can weather rising interest rates better than others.

| More on:
woman analyze data

Image source: Getty Images

Rising interest rates are headwinds for stocks, although some companies can weather the impact better than others. If you want to play smart, three stocks can strengthen your portfolio.

The National Bank of Canada (TSX:NA) continues to outperform in the wake of rapidly rising rates. In the consumer staples sector, Alimentation Couche-Tard (TSX:ATD) and Rogers Sugar (TSX:RSI) have market-beating returns thus far in 2023.

Strong capital and liquidity positions

Canada’s Big Six banks are bedrocks of stability. National Bank (+9.94% year to date) is the sixth-largest, yet the stock outperforms its larger peers. At $98.21 per share, you can feast on the 4.15% dividend yield.

On June 8, 2023, the $33.2 billion bank increased its Canadian prime rate by 25 basis points to 6.95%, but it didn’t affect the stock. The bank’s analysts said the central bank resumed its rate hike campaign last month after a four-month pause due to Canada’s resilient economy.

Because of slower economic growth, NA believes profitability is the challenge for firms in the coming quarters. In the first half of fiscal 2023 (six months that ended April 30, 2023), NA’s net income declined 5% to $1.7 billion versus the same period in fiscal 2022.

In Q2 fiscal 2023, the year-over-year drop in net income is also 5% (down to $847 million). The bank also announced a 5% increase in regular dividends despite increasing the provision for credit losses (PCLs) from $3 million to $85 million.

Still, its President and CEO, Laurent Ferreira, said that besides the adequate PCLs, NA has strong capital and liquidity positions to support profitable growth and navigate the uncertainty ahead.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if National Bank of Canada made the list!

Rising profits

Couche-Tard is a safe bet for risk-averse and long-term investors. In fiscal 2023, total revenues and net earnings rose 14.4% and 15.2% year over year to US$71.8 billion and US$3.1 billion. The $63.8 billion convenience store giant enjoys rising profits amid rising interest rates. Its global network is also expanding with continuous acquisitions.

Its CEO, Brian Hannasch, said Couche-Tard’s balance sheet is robust, and more deals are ahead. While the primary focus is North America, the company is open to pursuing opportunities in South America and Asia. In Q4 fiscal 2023, Couche-Tard acquired 2,193 sites in Belgium, Germany, Luxembourg, and the Netherlands.

If you invest today, the share price is $65.26 (+10.2% year to date), while the dividend yield is 0.86%.

Favourable sugar dynamics

Rogers Sugar is a winner because sugar is a staple and an everyday need. The $603.9 million company’s high profitability in Q2 fiscal 2023 is due to sugar’s strong performance. The net earnings during the quarters climbed 29.1% year over year to $11 million.

Its President and CEO, Mike Walton, said, “Canada’s favourable sugar dynamics and continued strong demand for sugar-containing products drove increased profitability in the second quarter of fiscal 2023.” He expects the trend to sustain for the rest of the year and help produce stable financial results.

The consumer staple stock is outperforming the TSX year to date, up 4.4% versus 2.3%. Also, at only $5.76 per share, the dividend offer is 6.22%.  

Solid picks

I would prioritize investing in the National Bank of Canada if I had free cash in 2023. Assuming I have more funds, Alimentation Couche-Tard and Rogers Sugar would be my backup stocks.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dice engraved with the words buy and sell
Dividend Stocks

EQB Inc Stock: Buy, Sell, or Hold

EQB Inc (TSX:EQB) is Canada's fastest-growing bank.

Read more »

pipe metal texture inside
Dividend Stocks

Enbridge Stock: Buy, Sell, or Hold Today?

Enbridge is up 7% in the past six months. Are more gains on the way?

Read more »

money cash dividends
Dividend Stocks

The 2 Stocks Every Dividend Investor Should Own for Reliable Cash

Dividend stocks offering consistent and reliable returns can be a crucial asset in any portfolio, especially for income-producing dividend portfolios.

Read more »

grow dividends
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX dividend-growth stocks now offer yields above 7%.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Building a large, tax-free nest egg in your TFSA with growth stocks can give you more control over your tax…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Dividend Stocks

May Boycotts: Is Loblaw Stock in Trouble?

Even extreme fluctuations in consumer purchasing patterns may not impact a stock as aggressively as demoralizing actions like boycotts.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want $2,000 in Annual Dividends? Invest $27,000 in These 3 Stocks

These three top dividend stocks could help earn a stable passive income.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Absurdly Cheap Stocks to Buy and Hold for Years

Looking for some great stocks to buy for long-term growth? Here are three absurdly cheap stocks that are impossible to…

Read more »