Escalating trade tensions between Canada and the U.S. have put investors on edge. On February 1, U.S. President Donald Trump imposed steep tariffs on Canadian imports, including a 25% levy on most goods and a 10% tariff on energy exports. In response, Canada retaliated with 25% tariffs on $155 billion worth of U.S. goods, raising fears of economic uncertainty. With trade-sensitive TSX sectors facing potential headwinds, investors may want to shift their focus to defensive stocks that can weather volatility.
For example, fundamentally strong utility stocks could be considered a safe haven in this environment. In this article, I’ll highlight three top TSX utility stocks that could be your best bet during this escalating trade war.
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Hydro One stock
If you’re looking for stability amid trade war concerns, Hydro One (TSX: H) could be a great defensive stock to consider. As Ontario’s largest electricity transmission and distribution provider, it plays an important role in keeping the province powered. H stock currently trades at $45.22 per share, with a market cap of $27.2 billion and an annualized dividend yield of 2.8% – offering steady income potential.
Hydro One’s financials are continuing to show resilience. In its third quarter last year, the company’s revenue rose 13.3% YoY (year-over-year) to $2.2 billion with the help of higher transmission rates and energy demand. Similarly, its adjusted quarterly earnings climbed by over 5% to $0.62 per share from $0.60, reflecting stable profitability.
As Hydro One continues to expand its transmission infrastructure with projects like the Waasigan Transmission Line, its long-term growth prospects remain strong.
Emera stock
Another solid option in the utility sector is Emera (TSX: EMA), which is a geographically diverse energy and services firm with a continued focus on transitioning from high-carbon to low-carbon energy sources. Currently, Emera stock is trading at $55.22 per share after surging by more than 16% over the last year, giving it a market capitalization of $16.4 billion. Investors seeking reliable passive income will appreciate its annualized dividend yield of 5.3%, which is paid quarterly.
The company’s financials remain stable, with its September 2024 quarter revenue rising 8% YoY to $1.8 billion. More importantly, its adjusted earnings for the quarter inched up by 8% from a year ago to $0.81 per share.
Notably, Emera’s three-year $8.9 billion capital plan is continuing to fuel this momentum. In addition, the company’s focus on infrastructure upgrades and decarbonization projects makes its stock even more attractive to buy now and hold for years to come.
Capital Power stock
If you’re looking for another resilient stock that can hold steady amid trade tensions, Capital Power (TSX: CPX) is worth considering. This Edmonton-based firm is a major player in North America’s power generation space, with a total capacity of 9,800 megawatts. CPX stock is currently trading at $53.22 per share, giving it a market cap of $7.4 billion. It also offers a solid annualized dividend yield of 4.9%.
In recent years, Capital Power has been expanding aggressively, especially in the U.S. market, where its recent acquisitions in California, Arizona, and Washington contributed over 50% of its third-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
The company’s U.S. expansion might not be affected by tariffs as electricity generation and utility services are largely domestic, with minimal exposure to cross-border trade tensions. Moreover, CPX stock’s recent $600 million medium-term note offering is likely to strengthen its financial flexibility, making this safe stock even more attractive to buy now.
