The start of last month saw the S&P/TSX Composite Index record a new high, but the benchmark index for the Canadian stock market has been in a state of disarray ever since. As of this writing, the index is down by 1.6%. The geopolitical instability caused by the US-Iran war is still impacting markets despite the fragile ceasefire holding at the time of writing.
Despite the recent pullback, the Canadian stock market is up by 6.6% year-to-date, with heavy-hitting sectors like banking and energy leading in positive territory. If I had $10,000 to invest in the stock market right now, I would allocate it to blue-chip Canadian stocks that show strength in a volatile market.
To this end, I will discuss a blue-chip stock from both industries that you can consider investing in amid the current environment.
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Bank of Montreal
Bank of Montreal (TSX: BMO) is one of my top picks to consider from the stock market. It is the oldest financial institution in Canada and boasts an almost two-century-old streak of paying investors their quarterly dividends without fail. This means that the third-largest Canadian bank stock by market cap has distributed payouts through multiple world wars and financial crises.
Well-capitalized with a wide economic moat, it has also been reshaping its business to become even stronger. The bank’s planned sale of 138 US branches and a push into the stronger market in the Western US is one such measure. It is also proceeding with acquiring Burgundy Asset Management and creating a tokenized cash platform with Google Cloud.
Even if it does not offer much in terms of capital gains in the near future, it can keep providing returns through regular dividends. As of this writing, it trades for $211.44 per share and it pays investors $1.67 per quarter, translating to a 3.2% dividend yield.
Cenovus Energy
Cenovus Energy Inc. (TSX: CVE) is my pick for the energy sector play. The $74.2 billion market-capitalization TSX integrated energy company headquartered in Calgary is well-positioned to make the most of the commodity price fluctuation. Due to its integrated business model, CVE can generate strong revenue across midstream and downstream operations.
Higher oil prices mean better profits from its production operations, while lower prices mean improved margins in its midstream and upstream operations. The deepening crisis in the Middle East means energy producers that are not relying on production in that region will benefit from the situation. As of this writing, CVE stock trades for $39.49 per share, up by 64.3% year-to-date. At current levels, it boasts a 2% dividend yield that you can lock into your portfolio.
Foolish takeaway
Extreme market volatility will likely persist for the foreseeable future. While not immune to the impact of broader market pullbacks, the stock of these two well-established companies is well-capitalized enough to navigate through the noise and keep delivering returns. When the dust settles, stocks with solid fundamentals and future earnings potential have the best chance of emerging stronger. To this end, BMO stock and CVE stock can be good holdings to consider.
