A recession-proof portfolio is designed to minimize the impact of economic turbulence on overall financial stability. The primary objective is to safeguard your capital and potentially yield modest returns even in the face of challenging economic conditions.
However, it is essential to understand that there’s no such thing as a completely recession-proof portfolio. Yet, you can make your investments more resilient to economic downturns. One effective approach is to prioritize high-quality stocks from defensive sectors, such as consumer staples and utilities, or consider investing in well-established blue-chip stocks.
With this backdrop, let’s explore three Canadian stocks that are fundamentally strong and could help create a recession-resistant portfolio.
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Fortis
Utility giant Fortis (TSX:FTS) could be a solid addition to your portfolio to safeguard capital and generate steady returns. The company operates a low-risk and regulated electric utility business. With a diversified asset base and strong focus on regulated businesses, Fortis generates stable cash flows, offering resilience against market volatility.
Thanks to its resilient business model and predictable cash flows, Fortis boasts a remarkable track record of dividend growth. The utility ranks among Canada’s leading dividend-paying stocks. What stands out is that Fortis has increased its dividend for an impressive 50 years.
Looking ahead, Fortis is well-positioned to generate solid earnings and cash flows, driven by its multi-billion secured capital projects, which will drive its rate base. Fortis’ $25 billion capital plan will enable the company to grow its rate base at a compound annual growth rate (CAGR) of 6.3% through 2028. This, in turn, will expand its earnings base and drive its future dividend payouts. Notably, Fortis expects to grow its dividend by 4-6% annually through 2028. Meanwhile, it offers a yield of 4.2% (based on its closing price of $55.90 on November 8).
Dollarama
Dollarama (TSX:DOL) is a must-have stock for safety, income, and growth regardless of the economic situation. The retailer owns a defensive business that is growing at a solid pace. Dollarama sells a wide range of products at low, fixed price points. This makes it a favoured destination for budget-conscious shoppers and enables it to drive traffic in all market conditions.
Thanks to its solid financials, Dollarama stock has consistently outperformed the broader market and has grown at a CAGR of over 21% in the past decade. Moreover, the retailer has consistently increased its dividend during the same period.
Looking ahead, its focus on value pricing, an extensive network of stores, and a capital-efficient business model will provide a solid foundation for growth. Further, its focus on operational efficiency will cushion its earnings and allow it to enhance its shareholders’ returns through higher dividend distributions.
Canadian National Railway
Shares of the Canadian National Railway (TSX:CNR) are a no-brainer to generate worry-free capital gains in the long term and add safety to your portfolio. Canada’s leading transportation company plays a crucial role in facilitating trade and shipping millions of tons of goods across North America. Consequently, its services are deemed essential for the economy, making it less susceptible to market volatility.
Thanks to its defensive business model and diversified portfolio, Canadian National Railway generates steady revenues. While the company’s focus on improving operational efficiency supports earnings growth.
CNR stock has grown at a CAGR of approximately 12% in the past decade. Moreover, it has enhanced its shareholders’ returns through higher dividend payments and share buybacks. Currently, it offers a dividend yield of 2.1%.
