It is a well-known fact that stock market investments can be susceptible to big volatility over short-term time frames. For some investors, such as those nearing retirement, taking a defensive portfolio orientation can be beneficial. Accordingly, having the right mix of bonds and defensive stocks can really pay off. Companies with sustainable earnings and growing dividends are preferential to those more speculative high-growth stocks at a certain point in an investor’s lifetime.
Thus, for those looking to take a more defensive stance, I’ve decided to dive into three stocks I’d put in this category. These companies are ones I’d consider potential core portfolio holdings for the long term.
Let’s dive in!
Dream Industrial REIT
Dream Industrial REIT (TSX:DIR.UN) is among Canada’s largest real estate investment trusts (REITs), with a portfolio of 321 industrial assets. These assets are scattered across Europe and the United States. The firm owns approximately 70.6 million square feet of leasable area. Dream Industrial REIT aims to deliver strong total returns to shareholders with secure cash flow.
Notably, Dream Industrial has proven its worth as a core dividend portfolio holding over time. Last October, the company announced a distribution of US$0.058 per share, bringing its total annual dividend payout to US$0.70 per share. While priced at a premium, the stock’s 5.1% dividend yield is comparable to shorter-term bonds, positioning this stock as an attractive proxy to the fixed-income market.
Notably, Dream Industrial’s dividend and growth profile are supported by strong fundamentals. The company reported excellent net operating income growth of more than 10% in the third quarter (Q3), with rental income growing more than 17%. With total assets of more than US$7.9 billion, this is a company investors looking for exposure to the real estate market may want to consider.
Fortis
Another top company investors often consider primarily for its dividend is Fortis (TSX:FTS). This natural gas and electricity utility company services more than 443,000 retail customers in North America. Importantly, the nature of this business (as a regulated utility) provides cash flow visibility and stability, something many other companies simply can’t provide.
Despite market volatility over the past few years, Fortis’s stock price has been relatively robust. Still trading around 15% below all-time highs, Fortis offers investors a healthy 4.3% dividend yield. Incredibly, this dividend has increased each and every year for more than five decades, making Fortis a dividend aristocrat worth considering on this basis alone.
Additionally, it’s noteworthy to point out that Fortis’s US$25 billion capital investment plan should continue to propel long-term earnings growth over time. With continued upgrades coming to 2028, Fortis’s expected annual mid-single-digit dividend-growth profile remains intact.
Restaurant Brands
Restaurant Brand International (TSX:QSR) remains my top pick in the Canadian market — period. Whether you’re a growth, income, or value investor, this is a company that provides a little bit of everything. That sort of Swiss Army knife value is hard to come by in the market and is the reason so many investors hold this stock for the long term.
This fast-food purveyor best known for its core Tim Hortons, Burger King, Firehouse Subs, and Popeyes Louisiana Kitchen banners, has a business model that’s about as defensive as it gets. In poor economic times, those looking to dine out may increasingly do so at one of Restaurant Brands’s locations. In good times, growth may continue at a relatively consistent pace.
Currently, Restaurant Brands provides a 2.8% dividend yield (which has come down substantially, considering this stock is nearing its all-time high). However, with a payout ratio of around 80% and a long-term growth strategy I think will continue to shine, this is a stock all long-term defensive investors may want to consider right now.
