2 Safe Stocks When Interest Rates Are Rising

These two safe Canadian stocks can help you navigate this period of high interest rates with ease.

In the last couple of years, interest rates have risen sharply. Elevated interest rates and high inflation have taken a toll on investors’ sentiments and consumer spending, leading to a broader market selloff. While the macroeconomic outlook is expected to gradually improve, with central banks in the United States and Canada hinting at potential rate cuts in the next year, macroeconomic uncertainties might not disappear overnight, as interest rates are still projected to remain elevated for a longer period.

That’s why investors may want to include some safe stocks in their portfolios that may continue to perform well even if rates remain high in 2024 and beyond. In this article, I’ll highlight two such safe stocks in Canada that you can consider buying today and hold for the long term.

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Great-West Lifeco stock

Great-West Lifeco (TSX: GWO) could be one of the safest stocks you can bet on if you are worried about high interest rates. This Winnipeg-headquartered firm primarily focuses on providing a variety of financial solutions to its customers, including life insurance, health insurance, asset management, and other retirement solutions. GWO currently has a market cap of $40.1 billion as the stock trades at $42.91 per share after rallying by 37.1% in 2023 so far, outperforming the broader market by a wide margin. In comparison, the TSX Composite benchmark has advanced by 6.4% year to date.

In the September quarter, Great-West continued to post operational improvements due mainly to disciplined cost management, also benefiting from recent strategic acquisitions. As a result, its adjusted quarterly earnings in the third quarter jumped 37.8% YoY (year over year) to $1.02 per share, exceeding analysts’ expectations of $0.98 per share.

In the last few months, Great-West’s subsidiary Canada Life has closed two major transactions by acquiring Value Partners Group and Investment Planning Council, which are likely to help the company accelerate its financial growth further in the coming years and help its share prices inch up. In addition, GWO’s 4.8% annualized dividend yield makes its stock even more appealing for long-term income investors.

Canadian Western Bank stock

Canadian Western Bank (TSX: CWB) is another fundamentally strong, safe Canadian stock that you may consider buying today. What makes this Edmonton-headquartered bank different from the rest is its primary focus on the financial needs of businesses and business owners, besides the strength of its insurance operations. CWB currently has a market cap of $3 billion as the stock trades at $31.28 per share after rallying by 30% year to date. At this market price, it offers a decent 4.3% annualized dividend yield.

In its fiscal year 2023 (ended in October), the Canadian Western’s total revenue rose 3% YoY to $1.1 billion with the help of continued strength in its net interest income. Although lower loan-related fees and a decline in its non-interest income weighed on its earnings in the last fiscal year, a recent decline in its provisions for credit losses reflected a positive trend, which, if continued, should help it post better financial results in the next year.

Moreover, the demand for business loans and CWB’s other financial products is likely to increase, as the Bank of Canada gears up to slash interest rates in the coming quarters. Considering that, I expect this safe Canadian stock to continue outperforming the main TSX index in 2024 as well.

The Motley Fool recommends Canadian Western Bank. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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