For Canadian investors wanting to generate outsized returns on the Toronto Stock Exchange, a few defensive stocks are worth adding to an investment portfolio. Nonetheless, finding the right mix of defensive stocks on the TSX can make an enormous difference in the upcoming years.
Let’s dive into two defensive stocks I think make a strong case to be long-term portfolio holdings. These are companies I’d consider buying and holding for at least five years, particularly useful for investors who expect some turmoil in the next few years.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) owns a convenience store network in North America, Scandinavia, Ireland, Poland, Russia, and the Baltics. It generates revenue by selling tobacco products, fresh food, groceries, quick service restaurants, and more. For the past 10 years, Alimentation Couche-Tard Inc. has been a top performer on the TSX, offering consistent growth globally.
Couche-Tard plans to expand its business operations globally by focusing on generating organic growth. The company will do this by consolidating its brands to enhance customer loyalty. This strategy will help Couche-Tard to grow exponentially in the upcoming years and offer high returns to Canadian investors. Furthermore, the company plans to trade its stock at a premium in the next five years, indicating it is the right time to invest in this company.
Couche-Tard currently has a market capitalization of $72.9 billion, with a Beta (5y monthly) of 0.87. This means the stock moves considerably less than the market, though in an up-and-to-the-right fashion. Currently, ATD stock is fairly valued at around 18 times earnings, with strong earnings growth I anticipate will continue long term.
Restaurant Brands
Restaurant Brands (TSX:QSR) is a Canada-based company operating a network of quick-service restaurants located around the world. The company generates its sales from lease income from franchised stores, royalty fees, and company-owned restaurants. Notably, Restaurant Brands is the parent company of world-class banners including Burger King, Tim Horton’s, Popeyes Louisiana Kitchen, and Firehouse Subs.
This isn’t just any old fast food conglomerate. Restaurant Brands has a diversified portfolio of banners, and a global reach. With a strong dividend yield of 3.2% and solid cash flow growth over time, Restaurant Brands’ overall business model is one I think should be among the most defensive in the market. People need to eat, and enjoy eating outside the house. As consumers trade down to more price-effective options, Restaurant Brands should see continued growth, even in times of economic turmoil.
In good times, Restaurant Brands also has shown the ability to provide strong growth. Last year, the company’s system-wide sales growth topped 12%, with net income seeing an even greater surge year over year.
This is a top stock I think is worth owning for the long term. Buying on previous weakness has proven to provide very strong returns. This is a stock I’m going to consider adding on any dips moving forward.
