A tariff war in North America has blown out this year, and investors are scrambling to fortify portfolios against market volatility. Long-term oriented investors – like individuals building retirement nest eggs – may do well holding low-volatility TSX stocks that can weather storms without sacrificing growth. Enter Beta, a measure of a stock’s volatility relative to the broader market. Domestic stocks with a Beta below 1.0 tend to swing less wildly during market turbulence, offering smoother returns.
While short-term Beta metrics can be swayed by fleeting events, the 5-Year Beta provides a clearer picture of resilience, capturing stock performance across economic cycles. Let’s explore three TSX-listed companies with low 5-Year Betas, proven track records, and business models built to thrive even if trade tensions escalate.
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The case for 5-year Beta
Beta’s value intensifies when viewed through a long-term lens. A 1-year Beta might reflect temporary shocks – a rate hike or a geopolitical flare-up – but the 5-year Beta smooths out such noise, revealing how a stock behaves through booms, busts, and everything in between. For investors with horizons stretching into retirement, this metric is a compass for stability. While low-Beta stocks aren’t immune to risk, and may look pricey, their muted volatility can help portfolios stay steady when markets sway.
Hydro One stock: The reliable backbone of Ontario
With a 5-year Beta of 0.35, Hydro One Ltd. (TSX: H) stock stands out as a bastion of stability. As Ontario’s largest electricity transmission and distribution company, the utility’s business model is anchored in necessity: over 1.5 million customers rely on its services for power, regardless of economic conditions. Roughly 60% of Hydro One’s rate base comes from transmission assets, with the remainder tied to distribution – a regulated framework that ensures predictable revenue.
While tariffs could indirectly dent industrial power demand, Hydro One’s core residential customer base provides a durable buffer. The company’s $28.5 billion rate base target by 2025, paired with a 6% annual dividend growth plan through 2027, underscores its growth ambitions. Recent moves, like acquiring a 48% stake in the East West Tie transmission project, signal strategic expansion.
Over the past five years, Hydro One stock has delivered a 121.7% total return, outpacing the TSX Composite Index’s 98%, and it’s offering a 2.6% dividend yield today.
Hydro One stock is a compelling choice for long-term investors seeking steady growth shielded from market whims.
Loblaw stock: A discount retail anchor
Canadian discount store operator Loblaw’s (TSX: L) 5-Year Beta of 0.10 is among the lowest on the TSX, making it a rarity in the Canadian stock market. This ultra-low volatility stems from its dominance in consumer staples – a sector known for inelastic demand.
Groceries and discount retail, which form the bulk of Loblaw’s revenue, are non-negotiable expenses for households, even during recessions or trade disputes. The company’s ability to pass cost increases to consumers, as seen during 2022’s inflationary spike, highlights its pricing power.
Loblaw’s discount-store focus positions it well to thrive if tariffs squeeze consumer budgets.
Over the past five years, Loblaw stock has returned 201%, dwarfing the TSX’s performance despite interest rate hikes and market turbulence. Its modest 1.1% dividend yield may not dazzle, but it’s underpinned by reliable cash flows from a business model built for all seasons.
As trade tensions escalate, Loblaw stock’s defensive qualities and proven resilience make it a cornerstone for risk-averse portfolios.
Dollarama stock: The bargain hunter’s haven
Dollarama (TSX: DOL) stock’s 5-year Beta of 0.44 belies its remarkable 278% total return over the past half-decade – a testament to its ability to marry growth with stability. As Canada’s largest dollar store chain, its “under $5” price model thrives when consumers tighten their belts. Everyday essentials, which account for 90% of sales, remain in demand regardless of economic conditions, insulating the company from tariff-related demand shocks.
Beyond its domestic footprint of over 1,600 stores, Dollarama’s significant stake in Latin American retailer Dollarcity offers geographic diversification and growth potential in emerging markets.
The retailer’s performance during the pandemic – a period marked by supply chain chaos and erratic consumer behaviour – proves its crisis mettle. With a history of steady returns and a business model tailored for uncertainty, Dollarama stock is more than a discount retailer; it’s a strategic hedge against market volatility.
