Amid easing trade tensions and positive commentary from the Organization for Economic Co-operation and Development on the Canadian economy, the Canadian equity markets have witnessed substantial buying over the last few weeks. Meanwhile, the S&P/TSX Composite Index is up around 6.5% for this year and is trading close to its all-time high.
However, concerns over a global economic slowdown amid the United States’s protectionist policies persist. Given the uncertain outlook, I believe investing in defensive and dividend-paying stocks to stabilize your portfolios would be an excellent strategy. Therefore, the following three Canadian stocks would be excellent buys at this time.
Enbridge
Enbridge (TSX:ENB) is an energy infrastructure company that offers regulated midstream and utility services. It is also expanding its presence in the renewable energy sector, selling the power produced from these facilities through power purchase agreements (PPAs). Given its tolling framework, rate-regulated cost-of-service model, and PPA contracts, the company enjoys stable and predictable cash flows, allowing it to pay dividends consistently for 70 years. It has also raised its dividends at an annualized rate of 9% since 1995 and currently offers a healthy forward dividend yield of 5.9%.
Moreover, the rising energy demand has expanded the addressable market for Enbridge, with the company’s management identifying $50 billion of growth opportunities through 2030. Its planned annualized capital investment of $9 to $10 billion could expand its asset base and support its financial growth. The Calgary-based energy company’s management expects its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to grow by 7-9% annually over the next two years and 5% thereafter. Considering these growth prospects, I expect Enbridge to continue raising its dividends, thus making it an excellent buy.
Fortis
Second on my list is Fortis (TSX:FTS), which serves 3.5 million customers in the United States, Canada, and the Caribbean, meeting their electric and natural gas needs. Around 99% of its assets are regulated, while 93% are involved in the low-risk transmission and distribution business. So, its financials are less prone to commodity price fluctuations and macroeconomic volatility, generating stable and predictable cash flows.
Supported by these healthy cash flows, the utility company has raised its dividends uninterruptedly for the last 51 years, while its forward dividend yield stands at 3.7%. Moreover, the company has delivered an average total shareholder return of 10.5% for the last 20 years.
Meanwhile, Fortis is continuing with its $26 billion five-year capital investment fund, which aims to grow its rate base at an annualized rate of 6.5% to reach $53 billion by the end of 2029. The company expects to meet 70% of these investments through cash generated from its operations and the dividend reinvestment plan. So, I hope these growth initiatives will not substantially raise its debt levels. Considering its solid underlying business and healthy growth prospects, Fortis’s management projects an annual dividend increase of 4–6% through 2029.
Waste Connections
Waste Connections (TSX:WCN) collects, transports, and disposes of non-hazardous solid waste. It operates primarily in secondary and exclusive markets across the United States and Canada, therefore facing less competition and enjoying higher margins. It has grown its business through organic growth and strategic acquisitions, consistently strengthening its financial performance. Since 2020, the company has completed over 110 acquisitions, incurring expenditures of over $6.5 billion. Despite these aggressive acquisitions, the company has maintained its leverage ratio between 2.5 and 2.9.
Moreover, WCN is building 12 renewable gas plants that can contribute $200 million to its adjusted EBITDA annually. The management is hopeful that these facilities will become operational in the next year. Additionally, given its healthy cash flows and solid financial position, the company expects above-average acquisition activities this year. Therefore, I hope these growth initiatives will drive its financials, supporting its stock price growth.
