3 Stocks to Fight Back Inflation

Inflation and interest rates haven’t returned to anywhere near normal, so use these stocks to fight back!

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 5, 2023 3:30 pm EDT

Investors continue to seek refuge in stable assets that can weather the storm as inflation and high-interest rates loom on the horizon. For Canadians, the stock market offers an avenue to hedge against these economic challenges. Among the plethora of investment options, three Canadian stocks stand out as ideal choices to fight back against inflation and high interest rates.

These are Canadian Apartment Properties REIT (TSX:CAR.UN), Loblaw Companies (TSX:L), and Royal Bank of Canada (TSX:RY). In this article, we will explore why these companies are well-positioned to thrive during times of economic uncertainty.

a person prepares to fight by taping their knuckles — Source: Getty Images

RBC Stock

RBC stock has long been regarded as a stalwart in the Canadian banking sector, and its resilience makes it an attractive choice during periods of inflation and high interest rates. Several factors contribute to RBC’s appeal in this economic climate.

The stock trades at a modest 11 times earnings, reflecting a favourable valuation that provides investors with a margin of safety. RBC stock also offers a substantial 4.77% dividend yield, making it an attractive choice for income-oriented investors seeking refuge from rising prices.

The company recently surpassed earnings estimates, indicating its ability to adapt to changing economic conditions. This suggests that the bank has the resilience to successfully navigate through turbulent times.

Furthermore, RBC stock has a diversified business model, encompassing retail banking, wealth management, and capital markets, positioning it well to generate stable revenues and mitigate risks during economic downturns.

Loblaw stock

Loblaw stock, a leading Canadian grocery and retail conglomerate, presents investors with an enticing proposition in the face of inflation and rising interest rates. L has demonstrated remarkable resilience, with shares up 10% in the last year. This robust performance underscores the company’s ability to adapt to changing economic conditions.

The grocery chain has consistently beaten earnings estimates, reflecting its strong operational performance. This bodes well for investors seeking stocks that can withstand the pressures of inflation. While Loblaw’s dividend yield is more modest at 1.55%, the company’s track record of consistent dividend payments provides a reliable income stream, essential in times of economic uncertainty.

As a provider of essential goods and services, Loblaw’s business is relatively immune to economic fluctuations. People need to eat and buy groceries, regardless of economic conditions, which adds to the company’s stability.

Canadian Apartment Properties REIT

Real Estate Investment Trusts (REITs) often make excellent investments during inflationary periods due to their income-producing nature. Canadian Apartment Properties REIT (CAPREIT) stands out as a prime candidate for investors looking to hedge against inflation.

CAPREIT’s stock has shown remarkable resilience, with shares up 6% in the last year, demonstrating its ability to thrive in challenging economic environments. The REIT offers a healthy 3.33% dividend yield, making it an attractive choice for income-seeking investors. The stability of rental income adds to its appeal during inflation.

CAPREIT’s extensive portfolio of residential properties across Canada diversifies risk and provides a hedge against regional economic disparities. Inflation often leads to rising rents, which can benefit CAPREIT as it generates income from rental properties. Additionally, long-term leases can help protect against interest rate hikes.

Bottom line

Investing in Canadian stocks that are well-positioned to combat inflation and high-interest rates can help safeguard your portfolio in uncertain economic times. Royal Bank of Canada, Loblaw Companies, and Canadian Apartment Properties REIT are three prime examples of companies that offer stability, growth potential, and income generation. This makes them attractive options for investors looking to weather the storm.

While each stock has its unique strengths, the combination of these three investments can provide a well-rounded strategy to protect against the challenges posed by inflation and high-interest rates in Canada’s dynamic economic landscape.