Bracing for Higher Rates: Top 5 Companies to Safeguard Your Portfolio

Canadians should brace for long-term, higher rates and snatch up defensive stocks like Loblaw Companies Ltd. (TSX:L) and others.

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The Bank of Canada (BoC) moved to hike the benchmark rate by 25 basis points to 5% on July 12. That is the highest rate the country has seen in over 20 years. Today, I want to target five companies that are perfect for safeguarding your portfolio in this choppy climate. Let’s jump in.

This top grocery retailer has been super dependable this decade

Loblaw Companies (TSX:L) is a Brampton-based food and pharmacy company. It is the largest grocery retailer in Canada. Shares of this Canadian stock have increased 2.4% month over month as of mid-afternoon trading on July 18. The stock is down 1.3% so far in 2023.

This company released its first-quarter (Q1) fiscal 2023 earnings on May 3. It delivered revenue growth of 6% to $12.9 billion. Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 7.8% to $1.44 billion. Loblaw last had a solid price-to-earnings (P/E) ratio of 20. Moreover, it offers a quarterly dividend of $0.446 per share. That represents a modest 1.5% yield.

Here’s a top defensive stock to stash as rates continue to climb

Alimentation Couche-Tard (TSX:ATD) is a Laval-based company that operates and licenses convenience stores in North America, Europe, and Asia. Its shares have climbed 12% in the year-to-date period. In fiscal 2023, the company posted adjusted net earnings per share (EPS) of $3.12 — up 20% from $2.60 in the previous year. This defensive stock currently possesses a favourable P/E ratio of 16.

Why this dependable Canadian stalwart belongs in your portfolio

Canadian National Railway (TSX:CNR) is another Canadian staple that is worth stashing for the long term in the face of turbulence. This Montreal-based company is engaged in the rail and related transportation business. Its shares have dipped 1.9% over the past month. The stock is down 5.8% so far in 2023.

In Q1 of fiscal 2023, CNR delivered revenue growth of 16% to $4.31 billion. Meanwhile, operating income increased 35% year over year to $1.66 billion. Adjusted diluted EPS jumped 38% to $1.82. Shares of CNR possess a favourable P/E ratio of 19. It offers a quarterly distribution of $0.79, which represents a 2% yield.

The one energy stock I’d stash to safeguard your portfolio right now

Enbridge (TSX:ENB) is an energy infrastructure giant that needs no introduction. Its shares have dipped 2.9% month over month as of mid-afternoon trading on July 18. This top dividend stock is down 9.7% in the year-to-date period. The company has achieved over a quarter-century of dividend growth. Enbridge is trading in favourable value territory compared to its industry peers. It offers a quarterly dividend of $0.887 per share, representing a monster 7.3% yield.

One more defensive stock to hold today

Waste Connections (TSX:WCN) is the fifth and final defensive stock I’d look to snatch up in the face of higher interest rates. This Toronto-based company provides non-hazardous waste collection, transfer, disposal, and resource recovery services in Canada and the United States. Its shares have climbed 2.1% so far in 2023.

This defensive stock is also trading in solid value territory at the time of this writing. Waste Connections offers a quarterly dividend of $0.255 per share. That represents a modest 0.7% 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 has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Canadian National Railway and Enbridge. The Motley Fool has a disclosure policy.

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