The trade war, sparked by a flurry of tariffs being introduced and then increased, paused, or decreased in an unnervingly unpredictable way, has made stock markets volatile worldwide. The Canadian benchmark index, the S&P/TSX Composite Index, dipped by 11.07% between April 2 and April 8. The index saw a sudden 5.42% jump between April 8 and April 9 after the announcement of a 90-day pause to tariff hikes by the U.S.
Opportunistic and seasoned investors can use a downturn to invest in high-quality stocks at a bargain. However, it is equally important to strengthen portfolios through defensive stocks to mitigate significant losses.
Stocks across the board are experiencing the effects of the market volatility. However, a few defensive stocks are less prone to the impact of macroeconomic fluctuations. Today, I will discuss two defensive stocks you can consider investing in to inject some stability, income, and growth.
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A reliable income-generating stock
Fortis (TSX:FTS) is a staple holding for many investors in their portfolios in any market environment for stability, reliable income, and dependable income growth. Utility stocks typically resist volatile market movements, and Fortis stock is one of the top Canadian utility stocks to own.
The $31.30 billion market capitalization company owns and operates 10 natural gas and electric utility businesses in highly rate-regulated markets. Most of the company’s revenue comes from long-term contracted assets across Canada, the U.S., and the Caribbean. Even in the worst times, people cannot cut their utilities to save costs, making the services these companies provide essential.
The defensive business model and predictable cash flows allow Fortis stock to fund its regular payouts and increase dividends comfortably. Fortis stock has a 50-year dividend growth streak to reflect its reliability as a long-term holding for stability and income. As of this writing, it boasts a 3.92% dividend yield that you can lock into your portfolio.
A stock that delivers growth when most decline
Dollarama
During times of economic crises, people look for any and every opportunity to cut out unnecessary expenses. Utilities fall under that category, and so do a lot of essential supplies they get from stores. If a company offers essential everyday consumer products, general merchandise, and seasonal items at low fixed prices, it can do well during harsh economic environments.
Dollarama (TSX:DOL) is a $42.63 billion market capitalization dollar store retail chain that does just that. It is Canada’s largest retailer of items for $5 or less, and it has consistently outperformed the rest of the stock market due to its successful business model. The Canadian benchmark index is up by 6.88% in the last 12 months. In the same period, this retail stock is up by a massive 36.11%.
The stock seems to perform well no matter what the macroeconomic conditions are like. As of this writing, Dollarama stock trades for $151.95 per share and it even pays investors quarterly distributions at a 0.28% dividend yield.
Foolish takeaway
The announcement by the U.S. president of a 90-day pause to tariffs on countries worldwide effective immediately has undoubtedly resulted in a rally. However, it isn’t certain whether the sudden uptick will sustain itself for that long. The decision can just as easily see a reversal, judging by what’s been happening in the last few weeks, and reintroduce bear market conditions.
The pause also accompanied the announcement of a massive 125% increase in tariffs on imports of Chinese goods as retaliation for China’s retaliatory tariffs. China also announced that it will potentially forego implementing intellectual property protections. If it becomes a reality, the move can have unimaginable consequences for businesses worldwide.
It seems as though more volatility is on the cards, and strengthening your portfolio might be the wisest move right now.
