Buy Stability, Not Volatility: 2 Defensive TSX Stocks to Buy Now

Don’t be swept away with risk; instead, get in on low volatility and stability with these two stocks that will last.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 24, 2024 9:30 pm EDT

Defensive stocks are like that reliable friend who shows up with snacks during a movie marathon, no matter the drama on screen! These stocks come from industries that provide essential goods and services, such as utilities, healthcare, and consumer staples. Thereby making them less vulnerable to economic ups and downs. While the market might be doing its rollercoaster thing, companies in these sectors continue to generate steady revenue because people still need electricity, groceries, and healthcare. So, when the market gets a bit shaky, investing in defensive stocks can offer that comforting stability, like a warm blanket on a chilly day! With that, let’s look at two stellar options.

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Waste Connections

Waste Connections (TSX:WCN) shines as a perfect defensive stock, especially highlighted by its impressive second-quarter 2024 results. The company reported a revenue increase of 11.2% year over year, totalling $2.248 billion, which surpassed expectations. This growth is driven not just by solid operational execution. Also, strategic acquisitions have added significant revenue streams. With net income reaching $275.5 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) at $731.8 million, Waste Connections demonstrates its ability to thrive, even in challenging market conditions, proving its resilience and stability.

One of the key factors that make Waste Connections an attractive defensive investment is its robust adjusted EBITDA margin of 32.6%, reflecting a strong operational efficiency. The company’s focus on organic solid waste growth, combined with a healthy increase in volumes, further cements its position. All in a sector that remains essential regardless of economic fluctuations. This combination of operational excellence and strategic growth places Waste Connections ahead of many competitors in the defensive stock space.

Looking ahead, Waste Connections has raised its full-year 2024 outlook, projecting approximately $8.850 billion in revenue and an adjusted EBITDA of $2.9 billion. This optimistic outlook is supported by continued acquisition activity. This is expected to enhance future growth prospects. With strong cash flow generation, including $1.102 billion in operating cash flow year to date, Waste Connections is well-positioned to return capital to shareholders. All while funding additional growth initiatives. In a world where economic uncertainty can reign, Waste Connections stands out as a reliable choice for investors seeking stability and consistent performance.

Empire

Empire Company (TSX: EMP.A) stands out as a perfect defensive stock, particularly highlighted by its solid performance in the first quarter of fiscal 2025. The company reported earnings per share (EPS) of $0.86 and adjusted EPS of $0.90. This reflects strong control over its margins and costs despite a decrease in overall net earnings from the previous year. Same-store sales, excluding fuel, increased by 1.0%. Thereby showcasing resilience in consumer spending amidst economic uncertainties. With a gross margin increase of 46 basis points, Empire’s ability to enhance profitability. All while navigating market fluctuations illustrates its defensive nature in the grocery sector. This is essential for consumers, no matter the economic climate.

Empire’s strategic initiatives also play a crucial role in its status as a defensive investment. The company has successfully completed major transformation strategies, thereby enhancing its operational efficiencies and positioning it for long-term growth. These initiatives focus on store renovations, expansion of its discount formats, and investments in e-commerce through Voilà. This recently experienced a notable 26.2% sales increase. By continually improving its store network and adapting to consumer preferences, Empire not only maintains its competitive edge but also reinforces its stability, making it a reliable choice for investors seeking defensive stocks.

As Empire navigates the complexities of the retail environment, Empire’s emphasis on efficiency and cost control, coupled with a clear growth strategy, positions it well to weather economic storms. With a strong dividend yield of around 2.01% and a focus on returning capital to shareholders, Empire Company Limited offers both stability and potential for growth. Thus making it an ideal defensive stock for investors looking for reliability in uncertain times.