Canada is technically in a recession. The economy contracted by 0.1% on an annualized basis in the first quarter of 2026, following a 1% annualized decline in the fourth quarter of 2025. While the downturn remains relatively mild, economic uncertainty could weigh on investor sentiment.
There are some encouraging signs. Canada added 88,000 jobs in May, while the unemployment rate declined to 6.6%. The employment rate also rose to 60.7%, driven by gains in full-time positions. Even so, investors looking to protect their portfolios may want to focus on businesses with resilient earnings, dependable cash flows, and a history of rewarding shareholders through all phases of the economic cycle.
Here are three Canadian dividend stocks that appear particularly well positioned to hold up through a recession.
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Fortis: A utility built for stability
Fortis (TSX:FTS) is one of the most defensive dividend stocks on the TSX. As a regulated utility, the company generates highly predictable revenues from essential services that customers continue to use regardless of economic conditions.
Its track record speaks for itself. Fortis has increased its dividend for more than 50 consecutive years, making it one of Canada’s most reliable dividend-growth companies. During the last two recessions, adjusted earnings remained remarkably resilient, supporting both its operations and dividend increases.
The company also maintains a sustainable payout ratio of approximately 72% of adjusted earnings and an investment-grade S&P credit rating of A-.
Notably, the stock currently appears fairly valued. So, long-term investors may find it more attractive during broader market pullbacks. For those seeking recession-resistant income, Fortis remains a top-tier choice on dips.
Loblaw: Defensive demand in any economy
Loblaw (TSX:L) benefits from operating businesses that Canadians rely on every day. As the country’s largest retailer, with leading grocery and pharmacy brands including Superstore, No Frills, and Shoppers Drug Mart, it serves consumer needs that do not disappear during economic slowdowns.
This defensive business model has translated into consistent shareholder returns. Loblaw has increased its dividend annually since 2013 and delivered dividend growth of roughly 8% per year over the past decade. With a payout ratio of only about 24% of adjusted earnings, the company has ample room to continue raising its dividend while investing in future growth.
The primary concern is valuation. Shares trade at a roughly 50% premium to its long-term normal valuation, reflecting investor demand for dependable earnings. However, quality businesses rarely go on sale. For investors seeking a recession-resistant stock with steady growth prospects, Loblaw deserves serious consideration on meaningful market dips.
Royal Bank of Canada: A banking giant with staying power
Royal Bank of Canada (TSX:RY) is Canada’s largest bank and one of the country’s strongest financial institutions. Its diversified operations across personal and commercial banking, wealth management, insurance, and capital markets provide multiple sources of earnings and help reduce risk during challenging economic periods.
The bank has continued to perform well following its acquisition of HSBC Canada in 2024, further strengthening its market position. RBC has also increased its dividend every year since 2011 and has delivered annual dividend growth of roughly 7% over the past decade.
Although bank earnings can fluctuate during recessions, RBC’s scale, profitability, and strong balance sheet have historically allowed it to weather downturns better than many competitors. Since the stock currently trades above its long-term valuation norms, patient investors should seek buying opportunities on market dips for a more attractive entry point.
Investor takeaway
When recession risks rise, investors should probably wait for market dips and prioritize businesses with durable earnings, strong balance sheets, and reliable dividend-growth records. Fortis, Loblaw, and Royal Bank of Canada each operate in industries that provide essential services and have demonstrated resilience through past economic downturns. While valuations remain elevated, all three companies appear well built to withstand a recession and continue creating long-term value for shareholders.
