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.

Ambrose O'Callaghan

Ambrose O'Callaghan graduated with a BA in Political Science from McMaster University. After that, he jumped into the banking world. He worked from the front line to an investment associate role. After that, he found a way to marry his experience and knowledge in the world of banking and finance to his love and passion for writing. Ambrose is a passionate believer in Warren Buffett's value investing model.

Published July 19, 2023 4:45 pm EDT

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.

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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.