3 Safe Canadian Stocks to Buy Now and Hold During Market Volatility

These Canadian stocks offer the perfect trio for investors looking for growth, income, and long-term holds.

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 December 9, 2024 3:45 pm EST

When it comes to safe Canadian stocks, the key is to look for companies that exhibit a blend of financial stability, steady earnings growth, and a track record of weathering economic storms. A safe stock often has a robust balance sheet, consistent dividends, and operates in sectors with long-term demand. It’s not just about past performance but also future prospects, industry resilience, and management’s ability to innovate and adapt. Let’s explore why Fairfax Financial Holdings (TSX:FFH), Topicus.com (TSXV:TOI), and Canadian Utilities (TSX:CU) are great examples of safe investments.

Fairfax

Fairfax is a titan in the Canadian market, known for its diversified insurance operations and investment strategies. With a trailing price/earnings (P/E) ratio of just 8.8 and a strong return on equity of 17%, FFH demonstrates efficient capital utilization.

Its latest quarterly revenue grew by 10.2% year-over-year, reflecting robust business momentum. Fairfax’s leadership under Prem Watsa has a reputation for astute investment decisions, further enhancing its safety profile. While the dividend yield is modest at 1%, the payout ratio of 9.2% ensures sustainability. The Canadian stock’s beta of 0.82 signifies lower volatility compared to the broader market, ideal for risk-averse investors.

Topicus

Topicus.com, a relatively young player in the tech space, is making waves as a safe Canadian stock. While its trailing P/E is high at 80.1, indicative of a growth premium, it boasts a phenomenal return on equity of 26.6%. Its revenue grew 12% year-over-year in the most recent quarter, fueled by strategic acquisitions and organic growth in niche software markets.

Topicus operates under the wing of Constellation Software, known for its disciplined approach to capital allocation. Although it doesn’t currently pay a dividend, the stock’s beta of 0.64 signals low volatility, and its cash flow generation supports continued expansion.

Canadian Utilities

Canadian Utilities is the epitome of a defensive stock. As a utility company, it benefits from stable cash flows, driven by regulated operations. CU’s forward P/E of 15.3 suggests it’s reasonably priced, while its dividend yield of 5.3% makes it attractive for income-focused investors.

The Canadian stock has a remarkable history of 51 consecutive years of dividend increases, demonstrating a commitment to shareholders. Though quarterly revenue dipped slightly by 2.2% year-over-year, its long-term contracts and diversified energy portfolio provide reliability. CU’s beta of 0.66 underscores its stability in uncertain markets.

Safe and secure

Safety in Canadian stocks also comes from understanding a company’s debt levels. Fairfax’s debt-to-equity ratio of 37.2% is manageable given its cash reserves of $8.7 billion, ensuring liquidity. Topicus, despite a higher debt-to-equity ratio of 88.3%, generates significant operating cash flow of $330.5 million, showcasing financial health. Canadian Utilities’ debt-to-equity ratio of 149.9% might seem steep. Yet utilities typically leverage debt effectively due to predictable income streams.

Future outlooks matter just as much. FFH continues to benefit from rising interest rates, which enhance investment income for its insurance float. Topicus, with its focus on software for underserved markets, is positioned for sustained growth as businesses digitize. Meanwhile, CU is expanding its renewable energy footprint, aligning with global decarbonization trends and ensuring long-term relevance.

Dividends are another hallmark of safety. While Topicus doesn’t offer one, Fairfax’s conservative payout policy ensures it retains earnings for growth, and CU’s dividend aristocrat status speaks for itself. For investors seeking a mix of income and growth, these companies offer varied yet complementary advantages.

Bottom line

Fairfax Financial, Topicus.com, and Canadian Utilities exemplify what it means to be safe investments in Canada. From strong financials and consistent growth to dividend stability and low volatility, these Canadian stocks are worth considering for any long-term portfolio. Whether you’re after income, growth, or stability, this trio has something to offer, ensuring peace of mind even in challenging market conditions.