For many investors, now is the time to focus on adding defensiveness. Indeed, macro headwinds are brewing, and the clouds are getting darker. Accordingly, for those looking to defend your wealth, searching for companies with robust business models that can handle any economic climate is an important task. Companies with strong earnings and cash flow profiles and attractive valuations are going to be key in this regard.
Narrowing down the thousands of stocks into the market into a list of companies that may perform well in any environment isn’t an easy task. However, I’ve picked three stocks I think can do just that.
Here’s why these companies are among the top picks I think can defend your wealth long term.
Restaurant Brands
Restaurant Brands (TSX:QSR) is a global conglomerate of fast-food banners. With more than $35 billion in annualized sales produced in recent years, this quick-service restaurant giant has proven its ability to grow. The company generates the majority of its revenue via franchise fees, renting space to franchise owners and providing the blueprint for these franchisees to turn reasonable profits.
The parent company of Burger King, Popeyes Louisiana Kitchen, Tim Hortons, and Firehouse Subs has seen strong growth in recent years, though this growth rate has slowed. Consumer spending remains strong, and many consumers have upgraded to fast-casual options in this current climate.
However, if the tide does turn and a recession is around the corner, that could all change. This is a company that provides the sort of mid- to lower-end dining experience consumers may opt into in such an environment. With a price-to-earnings ratio under 18 times and a dividend yield of 3.4%, there’s a lot to like about this defensive stock’s valuation and its income generation potential.
Fortis
Fortis (TSX:FTS) remains among my top defensive picks for investors seeking dividend income. The company owns and operates 10 distribution assets and utility transmissions in the United States and Canada. Serving approximately 3.4 million customers in the region, Fortis has provided more than 50 consecutive years of dividend hikes, now yielding 4.4%. Impressively, this yield comes alongside a price-to-earnings multiple of only 17 times.
Utilities stocks have come into vogue for a number of reasons in recent months. Investors are now focused on the mega-trend, which is energy generation. In order for our economy to support the electrification push so many governments are pursuing, we’re going to need electricity and a lot of it. As one of the top Canadian electric and gas utilities on the market, Fortis stands to benefit from this push from the Canadian government. For those thinking long term, this is a defensive stock to own here, in my view.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS), better known as Scotiabank to its Canadian clientele, is a global bank focused on its core Canadian market as well as a number of higher-growth Latin American markets. This is a company that provides a range of retail banking, global markets and wealth management offerings that continue to see strong uptake from a global clientele.
Like its peers, Scotiabank does have some cyclical element to its business model. As a top lending institution in Canada, a downturn wouldn’t be great for its business model.
That said, as a highly diversified lender with a strong balance sheet and a price-to-earnings ratio of just 10 times alongside a dividend yield of 6.7%, there’s a lot to like about how this stock is positioned moving forward. For those seeking a defensive portfolio structure, these three stocks would be among my top picks right now.
