With all the uncertainty that continues to persist in the market and economy, it makes sense for investors to be cautious and consider adding low-volatility stocks to their portfolios.
Not only are policymakers still lowering interest rates and hoping for a soft landing, but now, with uncertainty about a new administration south of the border and potential tariffs and trade wars, there is plenty to be cautious about.
The problem is that many industries also have significant potential. So, if policymakers do achieve a soft landing, you don’t want to miss out on the rally by keeping your cash on the sidelines.
Therefore, if you’re looking to put your cash to work but are cautious about the heightened uncertainty in the market and economy today, here are three low-volatility stocks you can buy and hold with confidence.
One of the best low-volatility stocks on the TSX
Typically, the best way to find low-volatility stocks is to find companies that are highly defensive with stable and reliable cash flows. That’s why utilities are always some of the lowest volatility stocks on the market, and of all the utilities in Canada, Fortis (TSX: FTS) is easily one of the best.
Not only is Fortis a massive company with a market cap of more than $30 billion, but it also operates in jurisdictions all over North America. That means its already low-risk business providing essential utility services, which is also well-diversified, helps to mitigate risk even further.
In addition, because Fortis pays out the majority of its earnings back to investors through its dividends, most of its investors hold Fortis for the long haul, especially since it increases its dividends every single year.
Therefore, Fortis is one of the best low-volatility stocks to buy now because it won’t just protect your capital in times of turmoil, it can also provide you significant and growing passive income for years to come.
A top consumer staples stock
Another great place to find defensive businesses and low-volatility stocks is in the consumer staples sector. However, while many of the largest consumer staples stocks have low betas, in my view North West Company (TSX: NWC) is the best to buy.
North West operates grocery stores and supermarkets in remote and underserved communities across Canada, Alaska, and the Caribbean. Therefore, not only is it a defensive business, but by providing essential goods and services to areas with limited access to other retailers, the stock has a dominant position in the regions it operates.
Furthermore, over the years, North West has continued to vertically integrate to optimize its operations and improve its margins.
Plus, just like Fortis, North West also pays a significant and reliable dividend funded by its consistent free cash flow generation, which is a main reason its beta is well below 1.0.
So, although North West still has a beta higher than Fortis’ unbelievably low beta of 0.25, at just 0.63, the consumer staple is still one of the best low-volatility stocks you can buy today.
A top defensive stock to buy now and hold for years
In addition to two companies in the most common industries in which to find defensive and low-volatility stocks, another excellent investment to consider today is Waste Connections (TSX: WCN), a massive waste management company with a market cap north of $67 billion.
Waste management is another prime industry in which you can find low-volatility stocks because the services these companies provide are also highly essential.
Furthermore, the industry has significant growth potential as stocks like Waste Connections rapidly grow by acquisition, limiting competition and finding synergies to lower costs and improve margins.
So even though Waste Connections’ dividend only has a yield of 0.67% today, the stock’s beta is still well below 1.0 at just 0.58 times, showing how stable it can be.
Furthermore, as you would expect with a stock that only pays a small dividend, Waste Connections has a tonne of growth potential, especially for such a massive company.
In fact, after growing revenue by more than 10% each of the last three years, analysts expect another 11% jump in sales this year, which should push earnings even higher as its margins continue to strengthen.
Therefore, if you’re looking for a low-volatility stock that still has significant long-term growth potential, Waste Connections is a top stock to consider.
