Safe Stocks to Buy in a Bearish Market

Stocks like Dollarama stand out as excellent investment in all market conditions.

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Investing in “safe” stocks typically refers to choosing shares considered stable and less volatile than others in a bearish market. These are often associated with well-established companies with solid fundamentals and a track record of weathering economic downturns. 

However, one must remember that no stock is entirely risk-free, and the stock market always involves uncertainty. With this background, let’s look at two Canadian stocks likely to add stability to your portfolio in a bearish market. 

Fortis 

For stability, one could consider investing in prominent large-cap stocks within the utility sector. This sector is recognized for its defensive nature, as its services are deemed essential. Moreover, the regulated nature of their business allows them to generate predictable cash flows. Within the utility sphere, Fortis (TSX:FTS) stands out as a reliable choice.

Fortis owns a low-risk, regulated electric utility business. Thanks to its diversified and regulated assets, it generates stable cash flows in all market conditions, offering resilience against volatility. Further, its focus on delivering superior shareholder returns through capital appreciation and dividends makes it an attractive low-volatility stock. 

Thanks to its resilient business model and predictable cash flows, Fortis has a solid track record of delivering annual dividend increases, making it one of Canada’s top dividend-paying stocks. Further, the company increased its dividend for 50 consecutive years.

Fortis is well positioned to deliver robust total shareholder returns in the future years. The expansion of its rate base through substantial secured capital projects will enable it to deliver steady earnings growth and support its payouts. It’s worth highlighting that Fortis expects to grow its dividend by 4-6% annually through 2028 and offers a healthy yield of 4.4% (based on its closing price of $54.14 on December 12).

Dollarama 

Dollarama (TSX:DOL) stands out as an excellent investment in all market conditions. It also proves to be an ideal choice for investors seeking a combination of safety, growth, and income. The retailer owns a defensive business that generates solid growth. Dollarama’s ability to grow traffic and earnings, regardless of economic situation, enables it to deliver solid total shareholder returns through dividend payouts and capital gains. 

Dollarama provides a wide range of products at various low, fixed price points, making it a preferred choice for budget-conscious consumers. With a robust customer base, a commitment to direct sourcing, an extensive network of domestic stores, and a focus on operational efficiency, this value-oriented retailer consistently achieves double-digit growth in both sales and earnings.

Dollarama achieved a remarkable growth of over 18% in its top line during the first nine months of the current fiscal year. Moreover, its earnings per share registered an increase of approximately 30% during the same period.  

Looking forward, Dollarama anticipates a double-digit growth rate in comparable sales. Higher sales will drive its earnings and dividend payouts and support its stock price. Additionally, the company’s emphasis on expanding its presence through new store openings and value proposition positions Dollarama as a dependable long-term investment.

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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