The disruption in global energy supplies, persistent geopolitical tensions, and the renewed trade war with the United States of America have once again raised concerns of a recession, especially if inflation becomes red hot. Central banks already enacted interest rate hikes in 2022—2023 to combat inflation. A return to higher inflation could mean another spell of sharp interest rate hikes, which will impact profit margins across all sectors of the economy and lead to significant unemployment.
An economy that is slowing down does not inspire a lot of confidence in investors. When times get tough, Canadians look to cut costs wherever possible. This can impact a lot of high-growth businesses, especially those that see spending by Canadians using their discretionary funds. In a situation like this, you can still find high-quality blue-chip stocks that can continue generating strong revenues.
No matter how bad the economy gets, people need their essentials. This means businesses in the utility sector and the consumer staples sector are well-positioned to conduct business as usual.
Today, I will discuss a Canadian stock from each of these sectors.
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Fortis
Fortis Inc. (TSX: FTS) is perhaps my personal favourite when it comes to investing for literally any market environment. The $40 billion market cap utility holdings company owns and operates several utility businesses across Canada, the US, and the Caribbean. Electric and natural gas utilities are essential to every business and household. No matter how much people cut out from their lives to save costs, they need these basic services.
The fact that Fortis can earn in any market environment gives it the perfect defensive appeal for investors worried about economic slowdowns. Besides that, its dividend growth history is what makes Fortis a staple in many portfolios. Backed by predictable cash flows, Fortis has comfortably increased its quarterly payouts to investors for over 50 years, and it looks well-positioned to continue doing so.
As of this writing, Fortis stock trades for $78.36 per share and boasts a 3.3% dividend yield that you can lock into your portfolio today.
Metro
Metro Inc. (TSX: MRU) is a supermarket chain that falls under the consumer staples category. The $18.4 billion market cap company owns and operates Canada’s third-largest grocery store chain. Its network of stores includes Metro, Super C, and Food Basics. In Quebec and Ontario, it also operates several pharmacies under the Jean Coutu banner.
The company’s management increased the payout for owning MRU stock this year from $0.37 per quarter to $0.41 per quarter, marking the 31st consecutive year of dividend hikes. Backed by strong earnings, as indicated by a 4.1% rise in sales for the second quarter of the fiscal year, Metro stock is in an excellent position to continue distributing payouts for years to come.
As of this writing, MRU stock trades for $87.90 per share and boasts a 1.9% dividend yield.
Foolish takeaway
If you are looking for investment opportunities that can deliver explosive growth in a slowing economy, Fortis stock and MRU stock are not the equity securities to consider. If you seek the ability to continue generating returns and mitigating losses amid a downturn, you are looking at some of the best picks from the TSX.Remember, even the most defensive businesses are not immune to the impact of market crashes. However, some have the ability to continue generating returns through dividends better than others. To this end, Fortis stock and MRU stock can be two of the strongest picks for your self-directed investment portfolio.
