After a solid performance last month, the Canadian equity markets have turned volatile, with the S&P/TSX Composite losing 2.1% this month. Investors are growing nervous amid the substantial increase in equity markets this year, leading to a pullback. Also, concerns over the impact of the United States’s imposition of tariffs on imports and ongoing geopolitical tensions have turned equity markets volatile.
Given the uncertain outlook, investors can balance their portfolios by adding growth, defensive, and dividend stocks.
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Celestica
Celestica (TSX: CLS) is an excellent growth stock to have in your portfolio due to the favourable market conditions and its growth initiatives. The growth in AI (artificial intelligence) has increased the demand for AI-ready data centres. Hyperscalers are investing in building AI-ready data centres to meet the growing demand, thus driving the demand for high-performance computing solutions and storage controllers. Amid the expanding addressable market, the company focuses on launching innovative products and making strategic partnerships to strengthen its footprint.
Moreover, Celestica also has a strong presence in the aerospace and defence sectors. The revival of commercial air travel and rising defence budgets globally amid growing geopolitical tensions could support its growth. So, I expect the uptrend in Celestica’s financials to continue, thus driving its stock price.
Hydro One
Hydro One (TSX: H) is an excellent defensive bet due to its highly regulated business. It transmits and distributes electricity, with around 99% of its business rate regulated. Its low-risk and regulated utility business makes its financials immune to market volatility. Moreover, the company has been expanding its rate base at an annualized rate of 5% since 2018, thus driving its financials. Supported by these healthy financials, the company has raised its dividends at an annualized rate of 5% for the last six years, with its forward yield currently at 2.84%.
Meanwhile, the demand for electricity is rising amid the increased transition towards electricity due to growing awareness, favourable government policy changes, technological advancements, and decarbonization initiatives. Amid demand growth, Hyrdo One plans to expand its asset base with a capital expenditure plan of $11.8 billion that spans through 2027. Along with these investments, its improving operating efficiency and cost savings could boost its financials in the coming years. Given its growth prospects, stable cash flows, and healthy payout ratio, I believe Hydro One could continue to raise its dividends in the coming years, making it an excellent buy.
Enbridge
Enbridge (TSX: ENB) is an ideal dividend stock to have in your portfolio due to the contracted midstream energy business, stable cash flows, and consistent dividend growth. With 98% of its cash flows underpinned by long-term contracts, its financials are less prone to market volatility, thus generating healthy cash flows irrespective of the macro environment. Supported by these healthy cash flows, the company paid dividends for 69 years. It has also raised its dividends for 30 previous years, with its forward dividend yield at 6.36%.
Moreover, Enbridge has been expanding its asset base with a $27 billion secured capital investment program. Besides, the company has expanded its natural gas utility business by acquiring three facilities in the United States. These acquisitions would further lower its business risks while strengthening its cash flows. The company’s net debt-to-earnings before interest, taxes, depreciation, and amortization ratio rose from 4.7 in the second quarter to 4.9 at the end of the third quarter. Meanwhile, the management expects the contribution from its recent acquisitions to strengthen the ratio in the coming quarters. Given its growth prospects and stable cash flows, I believe Enbridge could continue its dividend growth, thus making it an excellent buy in this volatile environment.
