The stock market, economy, and world are becoming increasingly uncertain and unpredictable. Owning a set of safe defensive stocks as an anchor to your portfolio seems like a wise idea in this environment. If you are wondering where to take shelter from the recent global trade war, here are three Canadian stocks to consider holding.
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A top Canadian grocery stock
As Canada’s largest grocer, Loblaw (TSX: L) business should be a reasonably stable stock if Canada enters a recession. Everyone needs groceries, medicine, and basic essential goods that Loblaw provides.
Given its scale, the company can negotiate the best deals for its customers. Likewise, its mix of value and premium grocery locations cater to people from all walks of life. With Canadians preferring to buy Canadian, it is likely to enjoy a tailwind of higher loyalty. Certainly, its strong customer rewards program doesn’t hurt either.
The company is very well managed. Over the past 10 years, gross margins and earnings per share have steadily chipped higher. With a price-to-earnings ratio of 29, it is not the cheapest grocery stock. However, it gets a premium for its quality business.
A top utility stock
AltaGas (TSX: ALA) is a stock to buy if you want a mix of steady growth and attractive income. AltaGas operates two businesses. It has four regulated natural gas utilities in the U.S. and a midstream operation across Western Canada.
The utility business provides a stable and growing stream of income. It has several levers to grow by investing in infrastructure and maximizing return on investment. Its midstream company can do very well from greater demand for propane and other natural gas products in Asia.
For the past few years, AltaGas has been in turnaround mode. It consolidated operations and rapidly reduced debt levels. That turnaround is now largely complete. It has grown earnings per share by a 33% compounded annual growth rate (CAGR) in the past three years.
That will likely regulate to a mid- to high single-digit growth rate going forward. However, for a mix of modest capital appreciation and dividend growth, this is a solid stock to hold. It yields 3.4% right now.
A top Canadian insurance business
Intact Financial (TSX: IFC) is another resilient stock to hold through challenging times. Why? In places like Canada, certain insurances like vehicle liability are mandated by governments. Likewise, home insurance is generally mandated by landlords and lenders.
Insurance is as essential as buying groceries or using electricity. Intact has a dominant position as Canada’s largest property and casualty insurer. Its large scale gives it a great distribution network, a low overall operating cost, and the ability to offer affordable premiums.
Intact has steadily compounded shareholder value by a 14.6% rate over the past 20 years. In the most recent five years, it has compounded shareholder returns by a +17% rate.
While this stock only yields 1.9%, it has consecutively increased its dividend for 20 years. In the past 10 years, its dividend per share has grown by a 10% CAGR. For a stock with a low- to mid-teens earnings growth profile and a market-leading business, Intact is an attractive stock to hold through tough economic times.
