Stocks are inherently risky investments, meaning finding one that is 100% safe is impossible. Nevertheless, shares of some companies exhibit a higher resilience to wild market swings and are less volatile, thus providing stability to your investment portfolio.
It’s worth noting that stocks that are more resilient to economic downturns have well-established businesses, durable revenue growth, and a growing earnings base. Further, these companies continue to enhance shareholders’ returns through increased dividend payments and share buybacks.
Against this background, let’s look at three relatively safe Canadian stocks with strong fundamentals and solid dividend distribution history.
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Loblaw
Investors looking for safe stocks could consider investing in Loblaw (TSX: L). The company is Canada’s largest food and pharmacy retailer and operates a defensive business. Thanks to its resilient operating model, including discount stores, wide product offerings, and inflation-fighting price freeze, Loblaw consistently generates solid comparable sales, making its stock less volatile in economic downturns and adding stability to your portfolio.
While Loblaw operates a low-risk business, it has delivered solid capital gains over the past several years due to its ability to grow revenue and earnings rapidly. Notably, Loblaw stock has appreciated over 131% in the past five years, reflecting an average annualized growth rate of more than 18%, which is encouraging.
Besides delivering above-average capital gains, Loblaw has consistently enhanced its shareholders’ returns through increased dividend payments and share repurchases. Looking ahead, the retailer, with its defensive business, value pricing strategy, focus on optimizing its network, and increasing the penetration of private-label food products, remains well-positioned to drive its financials and share price higher.
Fortis
Like Loblaw, Fortis (TSX: FTS) is also a low-risk stock offering stability to your portfolio in all market conditions. Fortis operates a regulated electric utility business, and its services are deemed essential. Thanks to its regulated and diversified asset base, Fortis generates predictable cash flows, which support its growth initiatives and drive its payouts.
Fortis is a top dividend-paying stock in Canada and has consistently enhanced its shareholders’ returns through higher dividend payments. For instance, it has increased its dividend for 50 consecutive years.
Fortis, through its multi-billion capital plan, forecasts its rate base to grow at a compound annual growth rate (CAGR) of 6.3% through 2028. This will drive its earnings and dividend payouts. Fortis projects its dividend to increase by 4 to 6% per year through 2028. Moreover, it currently offers a well-protected yield of 4.4%.
Dollarama
The final stock on this list is Dollarama (TSX: DOL). The value retailer’s defensive business, solid growth, and focus on returning cash to its shareholders make it a compelling investment in all market conditions.
The retailer offers products at low and fixed prices, which drives traffic to its stores and supports comparable sales growth. It’s worth highlighting that Dollarama’s revenue and net earnings have grown at a CAGR of 10% and 16, respectively, since fiscal 2011. Moreover, its stock has gained nearly 184% in the last five years, delivering above-average returns. In addition, Dollarama has enhanced its shareholders’ returns through higher dividend payments over the past decade.
Overall, Dollarama is an attractive long-term stock offering stability, growth, and income.
