Markets can spend an impressive amount of time inventing new reasons for investors to worry. Inflation, fuel prices, interest rates, tariffs, recessions, wildfires. Pick a week and something will arise.
That’s when defensive stocks earn their place. I don’t mean a company whose share price magically refuses to fall. Those don’t exist. I mean a business selling something customers still need when economic conditions become uncomfortable. That makes food a decent place to start.
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Built differently
Defensive investing is less about predicting the next crisis and more about owning companies that don’t need perfect conditions to make money. People can postpone buying furniture, a new vehicle, or another gadget. Feeding a household isn’t optional.
That becomes even more valuable when a retailer operates in markets where competition is difficult to reproduce. Building stores is one thing. Supplying remote communities across northern Canada, Alaska, the Caribbean, and the South Pacific is another.
Planes, ships, winter roads, and complicated logistics tend to discourage casual competitors. That brings me to The North West Company (TSX: NWC).
NWC
North West operates 230 stores, with 170 in Canada, and another 60 internationally. Its banners include Northern, NorthMart, Alaska Commercial Company, and Cost-U-Less. Many of its northern locations sell far more than groceries. Stores can include pharmacy services, fuel, financial services, household products, and prepared food. In smaller communities, North West isn’t simply another retailer sitting beside five competitors.
That position showed up in its latest quarter. Second-quarter sales increased 5.4% year over year to $682 million. More importantly, same-store sales climbed 6.7% excluding currency movements, including a 7.4% increase in Canadian operations. Those are healthy numbers for a business whose main attraction is supposed to be stability.
Getting better
North West also has a current catalyst beyond customers continuing to buy groceries. Its “Next 100” strategy is improving merchandise assortment, procurement, inventory, and productivity across the business. Those changes helped lift gross profit 5.7% during the second quarter, while adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) rose 5.6% to $92.8 million.
That improvement arrived despite unusually high fuel-related freight expenses and is worth noticing. Shipping products into remote communities becomes painful when fuel prices jump, yet North West still expanded adjusted EBITDA and continued investing in productivity.
Management also increased the quarterly dividend again in September, from $0.41 to $0.42 per share. The increases haven’t been enormous, but consistent. At $52.70 per share, the current annualized dividend produces a yield around 3.2%. That’s not enough to make North West a pure income play. Instead, it adds another return while investors wait for the business to keep growing.
Considerations
For long-term investors building around Canadian dividend stocks, the balance appeals to me far more than simply hunting for the biggest yield available. But defensive doesn’t mean indestructible.
Higher fuel prices can make freight considerably more expensive. Wildfires and evacuations can disrupt northern operations. Wage inflation, currency movements, tourism weakness in international markets, and the sheer cost of supplying remote locations can all pressure margins.
The stock isn’t dirt cheap either. At $52.70, North West trades around 15 times forward earnings. That’s reasonable for a durable business, but not a valuation I’d call distressed. Investors could also consider holding shares inside a Tax-Free Savings Account (TFSA) when sufficient contribution room exists, allowing eligible dividends and future gains to compound tax-free.
Bottom line
I can’t tell you what the rest of 2026 will throw at investors. What I can tell you is North West sells products people need, operates in markets competitors struggle to reach, is growing same-store sales, and is finding ways to improve profitability even while freight costs rise.
Whatever markets decide to worry about next, I’d rather own a business that doesn’t require Canadians to stop needing dinner.
