Amid hopes that Donald Trump will strike trade deals with other countries and an improvement in business sentiment, with business owners now less pessimistic about a recession this year, the S&P/TSX Composite Index has continued its uptrend and is up 10.7% year to date. However, concerns persist about the impact of tariffs on global economic growth. Therefore, if you are worried that the equity markets could turn volatile in the coming quarters, then here are three defensive bets that you can buy right now to strengthen your portfolio.
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Waste Connections
Waste Connections (TSX: WCN) is a waste management company operating in exclusive and secondary markets of the United States and Canada. Despite a sluggish economy due to tariff-induced uncertainties, the company posted an impressive second-quarter performance earlier this week, beating its projections. The company’s topline came in at $2.41 billion, representing a 7.1% increase from the previous year’s quarter. Organic growth led by a 6.6% increase in its solid waste pricing and continued acquisitions drove its revenue. As of July 23, the company has acquired assets this year that can contribute $200 million to its annualized revenue.
Meanwhile, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew 7.5% to $786.4 million, while its adjusted EBITDA margin expanded by 70 basis points to 32.7%. Given its healthy cash flows and solid financial position, the company’s management anticipates a significant year of acquisitions. Additionally, improvements in employee retention and the adoption of technological advancements, such as robotics and optical sorters at recycling facilities, could support margin expansion in the coming quarters. Considering all these factors, I believe WCN would be an excellent defensive bet.
Hydro One
My second pick is Hydro One (TSX: H), a pure-play electricity transmission and distribution company with no substantial exposure to commodity price fluctuations. Additionally, around 99% of its business is rate-regulated, thereby its financials are less prone to economic cycles. Also, it has expanded its rate base through self-funded organic growth, growing its rate base at an annualized rate of 5.1% since 2018. Along with these expansions, its cost-cutting initiatives have boosted its financials, driving its stock price. Over the last five years, the company has delivered a total shareholders’ return of 106% at an annualized rate of 15.6%.
Furthermore, the Toronto-based utility company continues to expand its rate base, with management projecting its rate base to increase to $32.14 billion by the end of 2027, representing an annualized growth rate of 6.6% from its 2024 levels. Along with these expansions, favourable customer rate revisions and improved operating efficiency could support its financial growth in the coming quarters. Meanwhile, the company’s management predicts its adjusted EPS to grow 6-8% through 2027. Additionally, the company, which currently offers a forward dividend yield of 2.73%, anticipates increasing its dividend at an annualized rate of 6% through 2027.
Telus
I have chosen Telus (TSX: T), a telecom giant, as my final pick. After a challenging couple of years due to higher interest rates and unfavourable policy changes, the company has experienced solid buying this year, with its stock price rising by 20%. Its solid first-quarter earnings and falling interest rates have supported its stock price growth. Moreover, Telus enjoys healthy cash flows due to its recurring revenue streams, which enable it to pay and raise its dividend consistently. The company has raised its dividends 28 times since May 2011 and currently offers an attractive dividend yield of 7.38%.
Telus is also expanding its network infrastructure with a $70 billion investment over the next five years. These investments would expand TELUS PureFibre connectivity and 5G service across the country, thereby driving growth in its customer base. Additionally, the company’s other business segments, Telus Health and Telus Agriculture and Consumer Goods, have delivered solid results in the first quarter and could continue the uptrend in their financial performances. Amid these growth initiatives, Telus’s management expects to increase its dividend by 3-8% annually through 2028. Considering all these factors, I believe Telus would be an excellent defensive bet in this uncertain outlook.
