Don’t Get Cute, Just Buy Stability: 2 Defensive TSX Stocks to Buy Now

Here’s why Alimentation Couche-Tard (TSX:ATD) and Restaurant Brands (TSX:QSR) are top defensive stocks to buy right now.

| More on:
Overhead shot of young adults using technology at a table

Image source: Getty Images

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has positions in Restaurant Brands International. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.

More on Investing

Investing

High-Yield Heavyweight: 1 REIT That Packs a Punch

SmartCentres REIT (TSX:SRU.UN) is a yield king with a long-term growth plan that could benefit from much lower rates!

Read more »

Where to Invest?
Investing

Yes, You Should Buy U.S. Stocks!

I strongly believe that every Canadian investor should overweight U.S. stocks. Here's why.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

TD Bank Stock: Buy, Sell, or Hold Now?

TD is out of favour with bank investors. Is this a contrarian opportunity?

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

Are you looking for dividends each and every month? This stock is the right "choice" for you, providing stable passive…

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Dividend Investors: Top Canadian Utility Stocks For June

Here are three of the top Canadian utilities stocks long-term investors may want to consider as portfolio staples moving forward.

Read more »

data analyze research
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Two stocks paying monthly dividends are excellent options for income-focused investors looking to increase their passive-income streams.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Invest $7,000 in This Dividend Stock for $519 in Passive Income

A $7,000 investment in this top dividend stock could generate over $519 annually in passive income.

Read more »

Group of people network together with connected devices
Tech Stocks

3 Canadian AI Stocks That Are Minting Coin in 2024

AI stocks like Kinaxis Inc (TSX:KXS) are outperforming the TSX.

Read more »