Amid the optimism over the United States Federal Reserve’s rate cut, the S&P/TSX Composite Index hit a new all-time high yesterday and closed 0.5% lower from its highs. Year to date, the index is up 14.5%. However, the escalating conflict in the Middle East is a cause for concern. So, if you are also worried the equity markets could turn volatile in the coming months, here are three top Canadian defensive stocks you can buy right now.
Fortis
Fortis (TSX:FTS) serves the electric and natural gas needs of 3.5 million customers across the United States, Canada, and the Caribbean. With around 99% regulated assets, the company’s financials are less susceptible to market volatility. Supported by these stable financials, the utility company has delivered an average total shareholder return of 11.1% for the previous 20 years. The company has raised its dividend for 51 years, with its forward yield currently at 3.98%.
Further, Fortis is expanding its asset base through a $26 billion capital-expenditure plan, including $6.7 billion in clean energy. Amid these investments, the company’s management projects its rate base to expand at an annualized rate of 6.5% from 2025 to 2029. Along with these growth initiatives, the company’s focus on improving its operating efficiency could boost its financials in the coming years. Meanwhile, the management expects to raise its dividends 4-6% annually through 2029. Considering all these factors, I believe Fortis would be an ideal defensive bet.
Dollarama
Dollarama (TSX:DOL) is another excellent defensive stock to have in your portfolio. Its superior direct-sourcing method and efficient logistics allow it to offer various consumer products at attractive prices. So, the company enjoys healthy same-store sales even during challenging macro environments. The discount retailer has been expanding its store network, increasing its store count to 1,583 as of July 28.
Amid these growth initiatives, the company’s revenue and net income have increased at a CAGR (compound annual growth rate) of 11.5% and 18% for the last 13 years. Continuing its uptrend, the company’s top line and net income grew by 8% and 17.9% in the first six months. Amid this solid financial growth, the company has returned around 800% in the last 10 years at an annualized rate of 24.6%.
Meanwhile, I expect Dollarama to continue delivering healthy returns, given its solid underlying business and healthy growth prospects. The company plans to increase its store count to 2,000 by 2031, representing an increase of 417 from its current levels. The company owns a 60.1% stake in Dollarcity, a value retailer in Latin America. Meanwhile, Dollarama has an option to increase its stake by 9.89% in Dollarcity by the end of 2027. Moreover, Dollarcity, which operates 570 stores, plans to expand its store count to 1,050 by the end of 2031. These growth initiatives could continue to drive Dollarama’s financials and support its stock price growth.
Waste Connections
Waste Connections (TSX:WCN) collects, transports, and disposes of non-hazardous solid waste. It operates in secondary and exclusive markets across the United States and Canada, thus facing lesser competition and enjoying a higher operating margin. The company has expanded its business through organic growth and strategic acquisitions, boosting its financials. Amid the financial growth, the company has returned 572% in the last 10 years at a 21% CAGR.
Meanwhile, WCN has a solid pipeline of acquisition opportunities across its footprint, positioning it to generate $700 million of annualized revenue from its acquisitions in 2024. It has several renewable natural gas and resource recovery facilities under construction, which could become operational over the next few years. Given its solid underlying business and healthy growth prospects, I expect the uptrend in the company’s financials to continue. Besides, WCN has rewarded its shareholders by increasing its dividends at a 14% CAGR since 2010.
