Just because other investors are getting excited over the potential for rate cuts to arrive over the second half of 2024 does not mean it’s all right to neglect risk. Indeed, it’s times like these, when all perceive risks to be limited (and when many are more than willing to pay up for some of the market’s hotter stocks), that it can pay to be contrarian. So, to paraphrase the brilliant Warren Buffett, one should be fearful when others are greedy and greedy when others are fearful.
Now that investors are getting greedy, especially when it comes to the high-flying tech plays that are surging by double-digit percentage points in just a matter of weeks, it can pay to play a little defence with your portfolio. Let’s look at three defensive stocks that I think make sense to check out right now while the price of admission is relatively depressed.
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Hydro One
Hydro One (TSX:H) stock is one of the best utility stocks to hold if you’re looking to pad your portfolio from extreme levels of volatility. Indeed, if you’re a jittery investor, it may make a lot of sense to stash shares of H at the core of your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP). At writing, shares yield 2.9%, a fair amount but nowhere near some of the market’s dividend heavyweights.
After a strong year of gains (14.5% over the past year), H stock is a great way to score capital gains alongside dividends and above-average dividend growth. Indeed, it’s hard to believe that shares of the stable utility have doubled over the past five years! That’s a testament to the calibre of utility you’re getting with Hydro One. With $181 million in profit clocked in for the fourth quarter (Q4), Hydro One continues to be a powerhouse for investors.
Fortis
Fortis (TSX:FTS) stock sports a more bountiful 4.53% dividend yield at writing. Over the past five years, shares of FTS have been quite a dud, rising just 10%.
Going for 16.9 times trailing price to earnings (P/E), Fortis stock stands out as a compelling value play as shares look to flirt with 52-week lows again. Though Fortis isn’t doing as many things right as Hydro One, it continues to be a great safety play in case rougher patches are in the cards for the markets.
Indeed, Fortis stock seems rather untimely, but if you seek low-cost yield, FTS is definitely worth a spot on one’s radar. Shares could begin to make up for lost time, perhaps sooner rather than later once rates finally do begin to retreat.
Canadian Utilities
Canadian Utilities (TSX:CU) is another dirt-cheap utility stock that could make sense to pursue if you seek an even larger yield. At writing, shares yield 5.95%, and at 14.03 times trailing P/E, the stock is incredibly cheap.
Of course, lower rates could be the driving force for utilities moving forward. And though Canadian Utilities is pretty much close to the lows of 2020, I’d not give up on the name just yet if you seek deep value and a rock-solid dividend payout.
