Stocks are volatile. Not to mention that bear markets will occasionally occur. To weather market storms, Canadian investors can consider more defensive dividend stocks in Canada as a safe harbour. Here are some examples for consideration. They have resilient businesses and tend to be less volatile than the average stock.
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Rogers Communications stock
Like its large Canadian telecom stock peers, Rogers Communications (TSX: RCI.B) stock has performed weakly because of a round of interest rate hikes by the Bank of Canada. Since 2022, the Bank of Canada raised the policy interest rate from 0.25% to 5.0%. Specifically, the telecom stock is trading at similar levels as it was three years ago and has actually declined about 13% from five years ago.
Despite the lacklustre stock performance, the business results have been solid recently. So far, it has reported three quarters of results for this year. Year to date, it increased its revenue by 24% to almost $14 billion, while its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), a cash flow proxy, climbed 33% to over $6.2 billion. Its adjusted net income increased by 30% to almost $1.8 billion, adjusted earnings per share climbed 27% to $3.37, and its cash provided by operating activities increased 15% to $3.8 billion.
At $61.62 per share, the stock trades at a good valuation with a price-to-earnings (P/E) ratio of about 14.1. Analysts estimate the telecom stock trades at a discount of approximately 17%. The telecom also pays a safe dividend yield of 3.2%.
Fortis stock
Fortis (TSX: FTS) stock is another Canadian dividend stock that can act as a safe harbour. Typically, on dips, investors are quick to buy defensive shares. Fortis is a diversified North American regulated utility whose assets are predominantly for the distribution and transmission of electricity and gas. These essential services are required through economic cycles, including recessions.
Furthermore, its 2024-2028 capital plan of $25 billion is largely comprised of low-risk projects, which allow management to project dividend growth of 4-6% per year through 2028. Indeed, Fortis has been a reliable dividend stock, having paid an increasing dividend every year for about 49 consecutive years! For your reference, its 10-year dividend-growth rate is 6.1%.
At $55.33 per share at writing, Fortis stock trades at a premium P/E of about 18.1. Analysts believe it is fairly valued. At this quotation, it offers a safe dividend yield of just under 4.3%.
National Bank of Canada stock
Interestingly, as the smallest Big Six Canadian bank, National Bank of Canada (TSX: NA) stock has been the best-performing big Canadian bank stock in the last one, three, five, and 10 years. Its earnings have also been more resilient in the last two recessions — namely, during the global financial crisis around 2008 and the pandemic around 2020. In the former event, its adjusted earnings per share actually maintained growth. In the latter, its adjusted earnings per share only dropped about 5% in that fiscal year.
Needless to say, the bank is also able to deliver some of the best dividend growth in the sector. For example, its 10-year dividend-growth rate is about 8.9%. At about $95 per share, the stock is fairly valued and offers a dividend yield of close to 4.5%.
