It was only a matter of time before stock markets would start feeling the effects of various geopolitical and macroeconomic factors, particularly the trade tensions caused by tariffs by the United States. Stock markets worldwide are spiralling right now. As of this writing, the S&P 500 is down by 13.74%, representing the impact on the U.S. stock market.
While doing better, the Canadian benchmark index also indicates a downturn. The TSX/S&P Composite Index is down by 8.19%. The market is incredibly volatile right now, and there is no telling how deep this decline will get.
In times like these, most stock market investors tend to act on fear and take money out of the markets. However, it is exactly such situations where making smart investments can pay off really well in the long run. Seasoned investors know how to use market volatility to their advantage by identifying smart picks they can bank on during harsh economic environments.
What do I think is a smart investment right now? If I had to choose one TSX stock, it would be Fortis (TSX:FTS). I will discuss why it is a must-have right now and in any market environment.
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Fortis stock
Before we take a look at why Fortis can be a good pick, it’s important to understand that the ongoing market downturn isn’t out of the ordinary. In fact, it is entirely normal for the stock market to decline and recover. Stock markets are inherently cyclical, and markets rise and fall all the time. The key to success as a stock market investor is to not let the panic take over and make rash decisions.
Given that backdrop, Fortis can be an excellent pick. Fortis is one of the largest and most reliable utility stocks. The $32.12 billion market-cap utility holdings company has several natural gas and electric utility businesses under its belt. It serves customers in heavily regulated markets, and most of its revenue comes from long-term contracted assets. What does that mean? It means stability.
Utility companies are naturally defensive businesses, especially during recessionary environments. When times are hard, people cut any unnecessary expenses. No matter what happens, people will do their best to keep the natural gas and electricity running. This automatically makes cash flows for companies like Fortis much safer than for businesses in other industries.
The company’s contracts span decades, guaranteeing stable and recurring revenue streams for the company that can last market crashes. As long as Fortis continues providing its services, it can generate the cash flows necessary to fund its dividends. Fortis also boasts a dividend-growth streak of over 50 years.
Foolish takeaway
As of this writing, Fortis stock trades for $64.32 per share and boasts a 3.82% dividend yield. The stock is up 7.88% year to date, doing much better than the broader market that’s declined over 8% in the same period. The defensive nature of the business can keep it afloat through this time. I think Fortis stock is a core holding for any self-directed investment portfolio and a great addition during times like these.
