As Trump tariffs continue to swing markets wildly in both directions, Canadian investors may wish to start rotating into dividend stocks with lower betas. Indeed, lower beta strategies do not guarantee one will be spared come the next leg lower, especially if we’re in the midst of a bear market and U.S.-China trade talks don’t progress as we head into the summer months.
Even when all hope is lost, though, you shouldn’t dare time the market, as the future will always be uncertain. And it’s not worth making huge portfolio moves based on what you think will happen with a specific market-moved outcome. Indeed, playing the long game, staying within your circle of competence (a phrase coined by the great Warren Buffett that suggested investors invest in what they know and understand), and not overreacting either way (fear or euphoria) is the best way to build wealth in the equity markets over the long haul.
As the U.S. market continues to face the most pain, I’d have a preference for Canadian value stocks, many of which can do relatively well as Trump tariffs cause a horrid U.S. recession. Let’s check in on two names that I think are great ways to play defence as you look to ride out what could be another couple of months of massive downswings — but also upswings!
Metro
Metro (TSX:MRU) is a fantastic grocer that’s been quietly making new all-time highs steadily over the past few quarters. At $102 per share, MRU stock is at a fresh peak after soaring close to 45% in the past year. Year to date, MRU stock is up more than 13%, leaving most other stocks behind. As the winds of recession roll in, the low-cost grocer is positioned to thrive as more Canadian consumers seek better deals and opt to “buy Canadian” produce and other goods.
Either way, MRU stock is the ultimate defensive for an uncertain climate like the one we’re currently in. The stock trades at just shy of 23 times trailing price to earnings (P/E) with a 1.46% dividend yield. What’s more, the 0.27 beta is incredibly low, meaning shares are less likely to be caught in the next downdraft. For defensive-minded investors, MRU stock looks intriguing, even at all-time highs.
Canadian Utilities
Shares of steady utility firm Canadian Utilities (TSX:CU) are just shy of 52-week highs, currently going for $37 and change per share. Though somewhat pricey at 25.4 times trailing P/E, I’m a huge fan of the 4.93% dividend yield and think it can survive even the harshest of tariff wars.
As President Trump narrows in on tariffs on goods imported to the U.S. from China, I think Canada may be able to get a decent deal, especially as we gain more clarity on who will be Canada’s next prime minister at the end of the month. In any case, CU stock is a great place to ride out a storm, with a low 0.58 beta and strong past-year momentum, with shares surging 27% in the timespan.
