Allocating funds into defensive stocks in today’s market is smart for investors looking for stability, dividend income, and some protection from economic downturns. For instance, stocks from sectors like consumer staples and utilities, industries that people rely on no matter what the economy is doing, are likely to add stability to your portfolio and generate steady returns.
Against this background, here’s an allocation strategy that spreads $1,000 across two fundamentally strong, reliable Canadian stocks from defensive sectors.
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Loblaw stock
Loblaw (TSX:L) is a top stock to buy and hold for stability, growth, and income. Canada’s dominant food and pharmacy retailer’s defensive business model performs well in any economic climate, enabling this blue-chip company to consistently deliver above-average returns.
So far this year, Loblaw stock has advanced approximately 8.7%, while the S&P/TSX Composite Index has declined by around 7%. Over the past five years, Loblaw stock has compounded at a compound annual growth rate (CAGR) of 25%, translating to a total gain of over 200%. This performance reflects its consistent same-store sales growth, solid earnings, robust cash flow generation, and shareholder-friendly initiatives like regular dividend payments and share repurchases.
Loblaw’s strategy centres on value, convenience, and customer experience. Its expanding network of hard discount stores under the NoFrills and Maxi banners is gaining traction across Canadian communities and is likely to support its growth. Notably, the retailer converted 38 stores to hard discount banners in 2024 and opened 78 new pharmacy care clinics. Moreover, it will continue enhancing its national footprint in 2025, driving its top line. These efforts, alongside a focus on competitive pricing, broad product selection, and expansion of private-label brands, will continue to drive customer loyalty and repeat traffic.
Additionally, Loblaw is investing in supply chain modernization and automation to lower costs and drive efficiency, ultimately enhance margins. Further, by strengthening its omnichannel platform and leveraging its loyalty program to drive promotional effectiveness, Loblaw is poised to attract more consumers.
Overall, in a challenging economic landscape, Loblaw’s resilient operations, store expansion, and steady earnings growth make it the top stock to buy and hold.
Fortis stock
Fortis (TSX:FTS) is another top defensive stock to buy now. The utility giant’s regulated business model and steady demand enable it to deliver reliable growth and add stability to your portfolio. In addition, it rewards investors with consistent dividend increases.
The company’s 99% of earnings stem from regulated utility operations. These steady, predictable revenue streams help insulate Fortis from economic swings and market volatility. Moreover, about 93% of its operations focus on energy transmission and distribution, areas that carry lower risk and aren’t affected by swings in commodity prices or the challenges of power generation.
One of Fortis’s strongest appeals is its dividend. The company’s consistent dividend growth (51 consecutive years), supported by predictable cash flows from its rate-regulated asset base, make it top income stock. Moreover, Fortis’s management is forecasting its rate base to increase at a CAGR of 6.5% for its rate base through 2029, which is expected to support continued dividend hikes in the range of 4% to 6% annually.
So far this year, Fortis stock has climbed over 11%, outpacing the broader market. Moreover, the stock yields a solid 4%, offering a steady stream of income that’s both reliable and well-protected.
In short, Fortis’s resilient business model, growing rate base, consistent dividend growth, and commitment to enhance shareholder value make it a compelling investment.
