Investor Alert: With a Recession Looming, Here Are 2 Top Defensive Stocks to Buy
The Motley Fool
Published Mar 19, 2019 08:00
With more and more economists talking about the dreaded R-word, — recession — along with the weakening housing market and record consumer indebtedness, investors are right to be concerned. But we should not use this as a reason to be scared of investing.
Over the long term, we have seen time and time again that markets rise and remaining invested is the right choice. But we need to adjust the composition of our portfolios at this time.
I have been suggesting that investors look for more defensive stocks for some time now, and at this time, as recession fears may be slowly coming to fruition, it is not too late to make this switch.
Here are two defensive stocks that can help investors continue to make money even in difficult economic times.
Metro (TSX:MRU) With a $12.4 billion market capitalization and a 1.66% dividend yield, Metro continues to be a story of consistency, stability, and shareholder wealth creation. These days, everything seems to be working for Metro, as earnings growth, dividend growth, and investor sentiment remain positive. Along with its recession-proof business, these factors can reasonably be expected to take Metro stock to new heights in 2019.
Metro stock has increased 129% in the past five years and has rallied 23% from October 2018 lows, as the market has rewarded defensive stocks.
This makes sense, as Metro’s business is an economically insensitive one, as the company has continued to post strong results, and as dividend increases have been typical of the company. To illustrate my case, 2018 EPS was $0.63 versus $0.51 in the same period last year for an increase of 23.5%, buoyed by the Jean Coutu acquisition.
The annual dividend was increased by 16% in 2017 to $0.65 per share, by 10.8% in 2018, and by 11% in 2019 to the current $0.80 per share.
Loblaw Companies (TSX:L) Loblaw is a similar defensive story, benefiting from the defensiveness of its industry.
Loblaw stock has a five-year return of 74.5% and is trading almost 30% higher than its 2018 lows, all while paying investors a growing annual dividend, which is currently at $1.18 per share for a dividend yield of 1.81%.
Loblaw has successfully used its scale to drive operating efficiencies and value for the consumer, driving a three-year annual EPS growth rate of over 12% and accelerating sales and margin improvements.
Get The App
Final thoughts No matter the debt levels or interest rate levels, these stocks will prove resilient due to their businesses’ defensive characteristics coupled with strong operating performance.
Fool contributor Karen Thomas has no position in any of the stocks mentioned.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019
This Article Was First Published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.