It’s no secret that the Canadian economy is in a state of flux. The rising inflation and the recent hike in interest rates have been quite alarming for everyone, and experts argue there is a chance that the Canadian market might enter another recession this year.
But don’t worry– there are ways to invest in a turbulent economy! You can protect yourself against unstable, unfavorable, and bear market conditions by investing your money in recession-proof stocks.
While some people claim there are no such stocks that are recession-proof. However, some stocks are relatively immune to recession and do better during market downturns.
There are several industries and sectors whose stocks experience steady demands in both good and bad times. This makes them ‘recession-proof,’ and that’s why many Canadians are looking into them.
In this blog post, we will look at some recession-proof stocks in Canada and how you can help your portfolio survive and thrive when the stock markets take an inevitable tumble.
8 Top Recession-Proof Stocks To Buy in Canada
If you want Canadian stocks to diversify and protect your investment portfolio from a recession, you should look at these 8 stocks to buy RIGHT NOW!.
1. Algonquin Power & Utilities (TSX: AQN/NYSE: AQN)
Algonquin Power and Utilities (TSX: AQN/NYSE: AQN) is a company that operates a diversified utility business. It delivers electricity, water, and natural gas to over one million connections in Canada.
The company generates two gigawatts of electricity and sells the generated power with the help of long-term contracts.
Since 2017, the company’s stocks have increased by 114%, outperforming some of the broader equity markets.
It is currently investing in solar and wind power. Governments around the world are encouraging these energy sources so that Algonquin might fare a little better than its peers.
2. Metro (TSX: MRU)
Metro (TSX: MRU) is one of the stocks you can trust in a recession. Metro is a company based in Montreal that operates as a retailer, distributor, franchisor, and manufacturer in the food and pharmaceutical sectors.
One sector that proved resilient during the 2020 market pullback is the grocery and pharmaceutical sector. People will always need this sector no matter how tough things get. Investors trust that these essential services will not fall even during a recession.
Shares for the Metro stock climbed 2.9% in 2022 and hit an 18% increase from the previous year. Its sales have increased by 1.9% yearly, reaching about $4.34 billion. The stock possesses a favorable price-to-earnings ratio of 19 and offers a quarterly dividend of $0.275 per share.
3. Northwest Healthcare (TSX: NWH.UN)
Northwest Healthcare Properties REIT (TSX: NWH.UN) is a company with high-quality healthcare properties and investments across big countries like Canada, Brazil, Europe, New Zealand, and Australia.
The company currently owns 190 properties covering about 15.4 million square feet of leasable area and leases office spaces to healthcare tenants. The government taxing power ultimately backs Northwest Healthcare; 80% of its revenue is supported directly or indirectly by funding coming from public healthcare.
NWH enjoyed an approximately 98% occupancy rate and high rent-collection rate. It currently pays monthly dividends at $0.067 per share at a 6.4% dividend yield and a $0.80 annualized rate.
There’s a massive chance of potential growth in the company as they are developing projects worth around $348 million.
4. Dollarama (TSX: DOL)
Dollarama (TSX: DOL) is one of the recession-proof stocks in Canada. Dollarama sells discounted goods to Canadian for $5 or less. It has over 1000 locations across Canada and plans to expand to 2000 locations by 2031.
Many consumers become price sensitive during recessions and start looking for cheaper alternatives. When the economy is booming, and people’s wallets are full of money, they may be less concerned about spending a few extra bucks on items they want to buy.
However, when times get tough, people will go to stores where they can get cheaper alternatives. They would go to stores like Dollarama instead of places like Walmart.
Though Dollarama didn’t thrive during the COVID-19 bear market, it still fared better than banks and airlines during this time.
5. Fortis (TSX: FTS)
Fortis (TSX: FTS) is North America’s most defensive stock and one of the best recession-proof stocks in Canada. Fortis is a regulated utility company in Canada that owns the means of generating power.
Utilities are essential services. It is nearly impossible to live without them. Your electricity is the last thing you want to shut down during a recession. Nobody wants to go cold in the winter, so Fortis contracts are usually locked in long-term, and it keeps raising its dividends.
The company has a 48-year dividend growth streak and intends to keep it growing at a 6% pace over the next six years.
6. Hydro One (TSX: H)
Hydro One (TSX: H) is a top utility company in Canada’s largest province. This year, the company’s shares have climbed 7.3%, which is 14% bigger than it was in the same period last year.
The company has delivered dividend growth every year since its debut on TSX. Its quarterly dividend is currently $0.28 per share, representing a 3.1% increase.
Earnings per share of Hydro One climbed 15% to reach $0.52 in the first quarter of 2022.
7. Corby Spirit and Wine (TSX: CSW.A)
Corby Spirit and Wine (TSX: CSW.A) is a company based in Toronto that manufactures, imports, and markets spirits and wines in Canada.
During previous economic turmoil, alcohol has proven historically resilient. Alcohol consumption might increase during recessions.
Corby owns or represents top brands in Canada, like Lot 40 Canadian Whisky, Ungava Premium Gin, Polar Ice Vodka, and many others.
Currently, Corby offers a quarterly dividend of $0.24 per share, representing a 5.1% yield. Meanwhile, its adjusted net earnings increased by 7%, delivering adjusted revenue growth of 4%.
8. George Weston Limited (TSX: WN)
George Weston Limited (TSX: WN) is a Canadian company that operates through two separate subsidiaries specializing in real estate and retail.
The company operates through Choice Properties, a real estate investment trust in Canada, and through Loblaw, which is Canada’s largest grocery retailer.
During recessions and market downturns, grocery retail stocks hold firmly, and due to increased food prices, these stocks will grow.
In the first quarter of 2022, George Weston Limited posted its net earnings of C$373 million, which is a high increase compared to its net loss of C$52 million in the first quarter of 2021.
The company declared a dividend of C$ 0.66 unit on May 10, 2022, and it would b payable from June 14, 2022.
What Does Recession-Proof Mean?
Any asset, industry, company, or other entity can be described as recession-proof if it is economically resilient to the effects of a recession.
Defensive stocks like healthcare or utilities, which consumers must purchase despite the economic situation, are often cited as recession-proof stocks in Canada. Other examples of recession-proof industries are groceries, utilities, and alcohol industries.
While some items may be termed recession-proof, not all can withstand long recessionary periods. The consequences of an overdue recessionary period may be too much for some businesses and assets to withstand.
Notwithstanding, adding recession-proof assets such as Gold, Treasury bills, bonds, and cash to your investment portfolio will safeguard you against economic turmoil.
Defensive Stocks: Historically Recession-resistant Sectors
Not all stocks in the market have the resilience to fare well during recessions. However, some sectors are likely to do well and thrive because people will still buy some goods and services even when financial times are tough.
Some of these sectors include:
Consumer Staples: Despite the economic situation, consumer staples will remain in high demand. During a recession, people will likely shift from eating restaurant meals to preparing them at home.
Companies that supply food items, beverages, and household and personal products are stocks that will be in demand.
Health care: Companies in the pharmaceutical, biotech, healthcare equipment industries, and healthcare providers tend to be safer during recessions. The products and services they render will always be in demand.
Utilities: Stocks from companies that deliver water, gas, electricity, and independent or renewable power, can be trusted to hold even during tough times. Utility companies have limited competition and a stable cash flow. Their cheap Canadian stocks can do wonders to your portfolio.
Fine wine and the alcoholic beverage industry: during the Great Recession in 2008, the sales of alcohol grew by over 9%. Wine, distilled beverages, and beer will always be in demand, even during a recession.
Discount retailers and grocery stores: stocks from companies that offer discount sales and lower-priced items during a crisis are usually resilient to a recession.
Final Thoughts on Best Recession-Proof Stocks in Canada
Recessions are bad news, and investing during a recession can be challenging and daunting. However, you can fight recession by diversifying your investment portfolio with Canadian recession-proof stocks.
Canadian recession-proof stocks provide a great starting point for building a portfolio that can weather any storm and protect your portfolio from any economic downturn.
By investing in companies with a history of stability and profitability and focusing on companies with strong fundamentals and diverse revenue streams, you can sleep easy at night; rest assured that your investments are safe even if the market takes a turn for the worse.
Have you started to build your own recession-proof stock portfolio? If not, now is the time to get started! Consider adding at least one of these stocks to your list and see how they perform in the months and years to come.
FAQs on Best Recession-Proof Stocks in Canada
What stocks perform well during recession?
Healthcare, alcohol and wines, food, consumer staples, and basic transportation are examples of industries whose stocks will perform well in recessions.
What are the most recession-proof investments?
Are there any stocks that are recession-proof?
Yes. Grocery stores and packaged food makers are highly recession-resistant as well as other consumer staples such as household and personal products. they tend to experience stable demand in recessions.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
The primary purpose of Money Reverie is to help everyday Canadians make better financial decisions by providing up-to-date financial news and information, reports, product reviews, and government programs.