Yesterday, the Bank of Canada cut its benchmark interest rate by 25 basis points to 4.25%. It was the third straight interest rate cut by the central bank this year. Meanwhile, the rate cuts failed to improve investors’ sentiments as the S&P/TSX Composite Index closed flat yesterday. The weak economic data from the United States have raised fears of a slowdown. Amid the uncertain outlook, I expect the equity markets to remain volatile this month. So, you can buy the following three defensive TSX stocks under $100 to strengthen your portfolios.
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Hydro One
Hydro One (TSX: H) operates a low-risk utility business, meeting the electricity needs of 1.5 million customers. With 99% of its business rate-regulated, the company’s financials are less susceptible to market volatility. It has also adopted several cost-cutting initiatives, including outsourcing certain activities and adopting strategic sourcing initiatives, leading to cost savings of $1.5 billion since 2016. Supported by solid financials, the company has delivered over 120% returns over the last five years at an annualized rate of 17.1%.
Electricity demand is rising amid growing awareness and policy changes to reduce pollution. The growing demand for electricity could benefit Hydro One by expanding its addressable market. Meanwhile, the company is expanding its asset base with a planned capital investment of $11.8 billion from 2022–2027. Amid these planned investments, the company’s management expects its EPS (earnings per share) to grow by 5-7% annually. Its financial position also looks healthy, with liquidity of $3.9 billion.
Moreover, Hydro One has raised its dividends at an annualized rate of 5% from 2016 to 2022. Its forward dividend yield currently stands at 2.7%, and the management expects to raise its dividend at an annualized rate of 6% through 2027. Considering all these factors, I believe Hydro One would be an excellent buy.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX: ATD), which operates 16,803 convenience stores across several countries, would be my second pick. Yesterday, the company reported its first-quarter earnings for fiscal 2025, which ended on July 21. Its topline during the quarter grew by 17% amid growth across its three segments. The contributions from the acquisitions over the last four quarters and growth in its wholesale fuel business boosted its topline. However, weak fuel prices and a decline in same-store sales offset some of the growth. The company’s management has blamed the decline in discretionary spending amid the challenging macro environment for its weak same-store sales.
Meanwhile, ATD is focused on delivering value offerings and growing its loyalty membership program through personalized offerings and savings to boost its same-store sales. Given the highly fragmented United States retail market, the company continues to expand its footprint through strategic acquisitions. It recently signed an agreement to acquire 279 company-operated convenience stores from Giant Eagle for $1.6 billion. Besides, its “10 For The Win,” a five-year strategy, could also support its financial growth in the coming years. Considering all these factors, I believe ATD would be an excellent buy at these levels.
Canadian Utilities
Canadian Utilities (TSX: CU) has increased dividends for 52 years, the longest record for consistent dividend growth by a Canadian public company. Its forward yield is currently at a juicy 5.2%. The company’s low-risk electricity and natural gas transmission and distribution businesses provide more visibility over its cash flows, allowing it to raise its dividends consistently.
Meanwhile, the company expects to invest between $4.3-$4.7 billion from 2024 to 2026, expanding its rate base at an annualized rate of 3.5-4.3%. Besides, the company is growing its renewable energy assets with a 1.3 gigawatts project pipeline. Given these growth initiatives, I believe Canadian Utilities is well-equipped to maintain its dividend growth, thus making it an attractive buy in this volatile environment.
