1 Top TSX Stock to Own to Play it Safe in 2024

Inject more stability into your well-balanced, self-directed investment portfolio by investing in this Canadian Dividend Aristocrat.

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After an incredibly choppy year for most of 2023, the Canadian stock market saw one of its best periods, beginning in November 2023. As of this writing, the S&P/TSX Composite Index has seen a massive 10.83% uptick. Considering a certain degree of sustained upward movement by the Canadian benchmark index, it is easy to understand the feeling of being optimistic about investing right now.

Where most people feared the onset of a recession, the stock market is gaining pace as 2024 draws nearer. It certainly appears as though the market might have managed to dodge the recession, but now is not the time to become complacent. Granted, the risk appetite in the current market environment is higher than in the last few months. Still, investors must not forget the importance of not being greedy.

I am not saying that being a complete contrarian is the way to go. However, practicing at least some caution right now is warranted. Interest rate hikes have come to a pause, and inflation is slowing. Many hope that we will see interest rate cuts happening soon.

Lower rates right around the corner?

After pausing interest rate hikes, the Bank of Canada (BoC) might have the means to reduce interest rates sooner than anticipated. That said, does it also indicate that investors can start allocating all the money they can to beaten-down, high-growth, and high-risk stocks? Perhaps not.

Like the rapid growth of tech stocks across the board before the meltdown, the industry might still be in a bubble that is about to burst.

The introduction of artificial intelligence (AI) technology might have justifiably sent many tech stocks soaring to better levels. However, investing entirely based on momentum is never a safe bet. When investing in the stock market, the value of the underlying stock is also a major factor to consider.

Improvement in the economy might make for a “soft landing” for the economy, but it is always better to continue hoping for the best and preparing for the worst. This is where investing in a top Canadian utility stock might be a great play.

Fortis

Fortis (TSX:FTS) is one of the best dividend stocks to own if you want to inject some stability into your portfolio to offset market volatility. The $26.20 billion market capitalization utility holdings company is a Canadian Dividend King with a dividend-growth streak spanning over 50 years. It is one of two stocks that has managed to raise its payouts annually for five decades on the TSX.

Fortis is a top energy delivery and transmission player. It generates most of its revenue through long-term contracted assets in a highly rate-regulated market. It means that the company generates predictable and safe cash flows. While Fortis stock does not provide multi-bagger returns in a bull market, it can hold the ship steady when most other stocks see share prices fall off a cliff in bear markets.

With interest rates holding steady, Fortis saw a strong performance in its third quarter for fiscal 2023. As its earnings beat expectations, trimmed interest rates in the coming months might increase cash flows, possibly resulting in more dividend hikes for investors.

Foolish takeaway

As of this writing, Fortis stock trades for $53.64 per share and pays its investors their payouts a juicy 4.40% yield. It is impossible to predict what 2024 will be like. While keeping capital to invest in growth stocks is a good idea, you should consider investing in “boring” utility stocks like Fortis to offset potential losses with its stability in bear markets.

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 Adam Othman 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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