3 Canadian Stocks That Could Benefit From a Softer Economy

These three TSX names try to defend a portfolio in a softer economy with essential demand, monthly income, or a utility turnaround.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published April 27, 9:00 pm EDT

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Key Points

BCE sells connectivity people keep paying for, and its cost cuts and cash flow focus matter after the dividend reset.
SmartCentres collects rent from necessity-based retail with very high occupancy, supporting its monthly distribution despite payout-ratio risk.
Algonquin is repairing its balance sheet after asset sales, and steady regulated growth could help if the turnaround holds.

When the economy starts to soften, the best stocks are usually not the flashy ones. Investors tend to do better with businesses that sell essentials, collect recurring cash, or serve customers who do not disappear just because confidence slips. That’s why defensive income plays, necessity-based real estate, and utilities can all stand out when growth gets a little wobbly.

hot air balloon in a blue sky — Source: Getty Images

BCE

BCE (TSX:BCE) still fits a softer-economy setup for a reason. Canadians keep paying for wireless, internet, and connectivity, even when they pull back elsewhere. Over the last year, BCE stock also made some big moves to reshape the story, including its Ziply Fiber acquisition in the United States and a major push to simplify operations and improve cash flow. Furthermore, back in October, BCE stock lifted its 2028 cost-saving target to $1.5 billion, which gives investors a clearer sense of where management wants this business to go.

BCE stock reported full-year 2025 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $10.7 billion, up 0.7%, and free cash flow of $3.2 billion, up 10% from 2024. That helped after a bruising stretch that included a 56% dividend cut in 2025, which reset expectations but also gave the company more breathing room. Shares recently traded with a forward dividend yield of about 5.4%, a trailing price-to-earnings (P/E) near 4.9, and a forward P/E near 12.1. That is not a perfect setup, but for investors looking for income and a cheaper valuation in a shakier economy, BCE stock still looks relevant.

SRU

SmartCentres real estate investment trust (REIT) (TSX:SRU.UN) owns a huge portfolio of retail-focused real estate across Canada, with many properties tied to value-oriented and necessity-based shopping. Discount, grocery, and everyday-use tenants tend to hold up better than more discretionary retail. SmartCentres also keeps adding growth angles through self-storage, residential, and mixed-use development, so it is not just sitting there collecting rent and hoping for the best.

SmartCentres said fourth-quarter 2025 net rental income and other revenue rose 1.4% to $143.6 million, while funds from operations (FFO) per unit improved to $0.54 from $0.53 a year earlier. It also finished the year with 98.6% in-place and committed occupancy, which is the kind of number income investors love to see. Units recently traded around a trailing annual distribution yield of about 6.5%. The payout ratio still deserves attention, so this is not a risk-free income machine, but for investors who want monthly cash flow backed by high occupancy and defensive retail exposure, it is a very sensible fit.

AQN

Algonquin Power (TSX:AQN) is the turnaround pick of the group. Over the last year, the company got serious about fixing itself. Back in August 2024, Algonquin agreed to sell most of its renewables business for up to $2.5 billion to cut debt, with later leadership changes tied to that broader reset. That is not the smoothest story on the TSX, but it does show management finally dealing with the mess instead of pretending it would solve itself.

The latest results suggest the clean-up is starting to show. Algonquin reported full-year 2025 net earnings per share of $0.27 and adjusted net earnings per share (EPS) of $0.34, ahead of its prior guidance range, while using about $1.6 billion of net proceeds from asset sales to pay down debt. It also reaffirmed 2026 adjusted EPS guidance of $0.35 to $0.37 and said its regulated capital plan supports 5% to 6% compound annual rate-base growth through 2028. Shares recently traded with a forward yield near 4.2% and a forward P/E around 17. That is not screamingly cheap, but if the turnaround keeps working, it could still reward patient investors.

Bottom line

Put it all together, and these three stocks cover different parts of the softer-economy playbook. What’s more, $7,000 in each could bring in ideal income during a rebound.