Is your portfolio diversified? Adding one or more defensive stocks to your portfolio can provide that much-needed moat to counter economic uncertainty.
Fortunately, the market has plenty of defensive stocks to choose from. Here are three defensive picks that provide essential services while also granting investors stability, predictable cash flows, resilience during downturns, and even juicy dividends.
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Your backline investment
Like any winning sports team, every portfolio needs a backline that can provide defensive protection with flair for offense. That’s where the first of three defensive stocks, Fortis (TSX:FTS) comes into focus.
Fortis is one of the largest utility stocks on the continent. The company operates across 10 operating regions with a highly regulated business model.
In short, Fortis provides services and is compensated for that service based on long-term regulated contracts that span decades. This ensures a recurring and predictable revenue stream that allows the company to invest in growth and pay a handsome dividend.
As of the time of writing, Fortis offers investors a robust 3.5% yield. That payment is well-covered, dependable, and growing. In fact, Fortis has provided investors with annual upticks to that dividend for over 50 consecutive years without fail.
That makes Fortis one of just two Dividend Kings in Canada and a top pick for investors seeking defensive stocks to own.
Balance defensive appeal and growth
The next pick for investors seeking defensive stocks to own is Loblaw Companies (TSX:L). Loblaw is the largest grocer in Canada. It also operates the largest pharmacy network in the country through its Shoppers Drug Mart network.
Collectively, both add a one-two punch of essentials and strong demand to counter any market volatility. If that were all the company offered, it would be a stellar pick for those seeking defensive stocks.
But Loblaw offers a few other advantages. The company boasts strong private-label brands such as its President’s Choice, No Name, and Life brands. Incredibly, those brands are positioned across different banners and price points.
This means that if budgets are squeezed during a pullback, customers trade down to the next brand. The appeal of Loblaw’s massive network, which spans pharmacies and grocers, also allows for last-mile cross-shopping.
The company also offers a deceptively, yet increasingly attractive dividend.
As of the time of writing, Loblaw offers a quarterly dividend carrying a 0.90% yield. The deceptive part is Loblaw’s stellar 34% gain over the trailing 12-month period, which masks that dividend.
The retailer has also provided annual upticks to that dividend going back several years consistently without fail.
In short, Loblaw hosts a variety of unique factors that make it one of the stellar defensive stocks to own.
Go on the offense with this energy infrastructure star
One final pick for investors seeking defensive stocks to invest in is Enbridge (TSX:ENB). Enbridge is one of the largest energy infrastructure companies on the planet. The company generates the bulk of its revenue through its massive pipeline business.
The pipeline operation hauls massive amounts of crude and natural gas each day. So much, in fact, that Enbridge is a highly sought-after defensive pick.
In case you’re wondering, Enbridge transports one-third of all North American-produced crude and one-fifth of the natural gas needs of the U.S. market.
Incredibly, Enbridge offers more than just pipelines.
The company also operates one of the largest natural gas utilities in North America and a growing renewable energy business that has facilities in Europe and North America.
Collectively, those segments provide a recurring and growing source of revenue that allows Enbridge to invest in growth and pay out a handsome dividend.
As of the time of writing, that dividend works out to 6.2%, making it one of the best dividends on the market. Adding to that appeal is the fact that Enbridge has increased its dividends annually going back over three decades without fail.
Defensive stocks for any portfolio
Enbridge, Fortis, and Loblaw offer investors three distinct defensive stocks that can also provide income and growth potential.
Together, those three picks should, in my opinion, be part of any well-diversified portfolio.
