As we move into April and the beginning of the second quarter (Happy belated April Fool’s, by the way!), investors may wonder if the hot momentum can carry into the spring and summer months. The TSX Index is fresh off an incredible quarter, finishing up more than 6%.
Indeed, we’ve been quite spoiled so far in 2024 as Canadian investors. However, if you’re lacking in defensives, now seems like as good a time as any to top up that TFSA with some of the lesser-loved defensive dividend plays in case there is a market correction in store for the rest of 2024.
Indeed, timing the stock market is a bad idea, especially for beginner investors who should seek to stay invested for years at a time. That said, it’s always a good idea to be prepared for a return of volatility.
When we’re in the middle of a bull run and stocks only seem to rise higher by the day, it can be tempting to dump your defensive dividend stocks in favour of high-momentum plays to maximize your potential upside in the face of a roaring bull market.
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Why bother playing defence when you could go all-in on offence?
As the tides turn (nobody knows when, but it will in time), the defensive dividend plays could be next in line to stand tall, even as the TSX Index looks to retreat.
Just because the market run may end in correction does not mean you should give up on your non-defensive secular growers, provided they’re still trading at levels well below what you think they’re worth.
When it comes to the stocks that have surged by more than their fair share in the first quarter, though, it can’t hurt to take just a bit of profit off the table, perhaps investing the sum in some firms that can provide steadier footing in rougher waters.
Let’s check in with one such name that I view as a bargain buy this April!
Fortis
Fortis (TSX:FTS) stock has dragged its feet in the first quarter, ending Q1 slightly in the red (it was mostly flat). With a growthy 4.42% dividend yield and a pretty low 17.2 times trailing price-to-earnings (P/E) multiple, FTS stock stands out as a dirt-cheap dividend stock to batten down the hatches ahead of any potential surges in market volatility. Of course, the 0.17 beta (which entails a low correlation to the TSX Index) could help it steady even if the TSX Index gets rocked.
In any case, the main reason to go for Fortis has to be the predictable cash flow stream and juicy, growing dividend. Sure, 4.4% yields may not be massive in this day and age. But if you seek a low-cost bond proxy and desire to play defence, it’s tough to look past the utility juggernaut.
With flat-ish performance (up 7%) in the past five years, FTS stock seems ripe for a correction to the upside.
The Foolish bottom line
Fortis stock isn’t going to enrich anybody as the TSX rally picks up steam. However, if you seek a steady defensive stock that can pay you to wait, FTS stock is a gem that’s hiding in plain sight!
