With tariff jitters being sent down the spines of Canadians and the loonie taking yet another big hit, questions linger as to what investors should do to tame what could be an incredibly choppy environment. Indeed, only time will tell just how the Bank of Canada responds to the threat of tariffs. Either way, Canadian investors should diversify their portfolios and have a slight preference for the undervalued lower-beta names that may be able to provide your portfolio with a somewhat smoother ride from here.
Though tariffs, trade wars, and central bank uncertainties do not bode well for the Canadian economy, I still think there are great risk-off plays that can still make money, even in an off year. Of course, there’s a good chance that the Canadian economy can still hold its own in spite of the pressures that could mount in the coming months. And as an investor, it’s always wise to be ready well before any sort of storm has a chance to rock investors and the broader markets.
At this juncture, the Canadian dollar is flirting with multi-year depths. As such, I’m not so sure it’s a great time to be loading up on the U.S. defensive names. On this side of the border, we have arguably cheaper defensive dividend stocks with higher average yields. In light of this, I’d argue there’s never been a better time to buy Canadian volatility fighters ahead of a new year. In this piece, we’ll check out two that may be worth picking up right here.
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Fortis
Fortis (TSX: FTS) stock has been quietly ascending in recent months, now up more than 15% in the past six months. Though only time will tell if a breakout to new highs is around the corner, I must say I still like the price of admission into the slow-and-steady dividend grower. The stock trades at 19.4 times trailing price to earnings (P/E) and boasts a 3.91% dividend yield.
With a 0.23 beta, Fortis is less likely to be dragged down on those really bad days for the TSX Index or S&P 500. Further, the long-term growth narrative is still intact, and I don’t think it can be rattled by the market-moving events that could happen under a Trump presidency. At the end of the day, Fortis has a capital-investment plan in place that’s likely to extend the firm’s impressive dividend-growth track record through 2029.
In a world where uncertainties could mount, FTS stock is truly a name that can ground your Tax-Free Savings Account (TFSA).
Waste Connections
Waste Connections (TSX: WCN) is another predictable business that will be doing business as usual, even if the Canadian stock market were to correct and Canada’s economy were to unexpectedly fall into recession. The stock isn’t cheap, though, with shares going for north of 53 times trailing P/E.
However, given its economic resilience and propensity to uncover value via smart merger & acquisition deals, I think the premium is warranted.
With shares up close to 20% in the past six months, I’d only look to nibble for now, as there are cheaper ways to play fight back at volatility out there. The 0.72 beta and solid long-term momentum are intriguing, though, for those shooting to do better than the TSX Index over a long-term horizon.
