With the stock market surging higher this past week, many Canadian investors may be inclined to rebalance again, shifting things right back to risk-on mode. Undoubtedly, tech has been leading the charge higher. And with some of the mega-cap names within a stone’s throw of hitting all-time highs again, it seems like the fear and panic have turned into optimism. All it took was yet another week of new gains to propel stock markets in the green on a year-to-date basis. Indeed, many new investors may be looking back, wishing they had bought the dip when they had the chance before the sudden and violent V-shaped rally.
While it’s difficult to tell where this relief bounce will take us, I think that rebalancing again may be a mistake, especially if you’ve already finished positioning your portfolio with defence at the top of mind. In any case, it’s best not to time markets and focus on the long-term game plan. Of course, there will be rough patches, and another patch of rough waters could be ahead as firms shed more light on what tariffs will do to coming quarters and the haziness of future quarterly guides.
In this piece, we’ll check in on two defensive dividend value plays that I think could be great bets as volatility drops and the price of admission into the Steady Eddies begins to come in.
Fortis
Shares of steady Canadian utility firm Fortis (TSX:FTS) have been coming off their high in recent sessions. Now down close to 6% in the past week alone, defensive dividend investors may have a shot to batten down the hatches on the cheap now that investors are starting to get bullish again over the state of trade and artificial intelligence. With the CNN Fear and Greed Index shifting back into “greed” territory after spending quite a bit of time in the “extreme fear” zone, it should come as no surprise that tech and risk are back in style, while steadiness and low beta are out.
At 19.6 times trailing price to earnings (P/E), Fortis stock is a cheap and stable way to score a 3.8% dividend yield. Who knows? As the pullback continues, maybe we’ll get another shot to grab shares with a yield over 4%. Either way, I view the latest pullback as overdone, especially given that the first-quarter profit and sales were higher than the same period last year.
You won’t get massive rebound gains from this bond proxy. But what you will get is a rock-solid, growing dividend that can withstand a recession. As recession risks begin to drop off, Fortis stock could be headed back to $60 per share, a level I’d look to be a buyer.
McDonald’s
McDonald’s (NYSE:MCD) was a pillar of stability amid the worst of April 2025 tariff horrors. Going into mid-May, the stock’s down close to 5%. And while it’s not a huge pullback, I think it’s an unjust one that’s more than buyable, especially as the company looks to improve upon a relatively muted first quarter.
The fast-food giant saw first-quarter comparable sales slip amid the consumer slowdown. Indeed, macro conditions are harsh, but they may not be too far from turning a tide. Either way, MCD stock stands out as a value buy at 27.2 times trailing P/E with a 2.27% dividend yield. Also, the 0.57 beta entails less downside risk should the S&P 500 relief rally end with another leg lower.
