Defensive Names to Add to Any Low-Risk RSP

Due to consistent returns, shares of North West Company Inc. (TSX:NWC), Loblaw Companies Limited (TSX:L), and Metro, Inc. (TSX:MRU) may just be an investor’s best friend.

| More on:
The Motley Fool

Just as TFSA contribution opens annually on January 1, the month of February is traditionally viewed as the deadline to make an RSP contribution. For those not in the know, the annual RSP deadline to count a contribution for the previous year’s tax year is the 60th day into the new year, which is typically March 1. Depending on the year, it could be February 29 or pushed back by a few days if March 1 falls on a weekend.

There are many possibilities when looking for investments to add into an RSP. For investors purchasing individual equities, there are either cyclical or defensive stocks. Cyclical stocks are characterized by large variations in profit due to the business cycle. In times of economic prosperity, profits will be significantly above the long-term average, while during recessions, profits will decline drastically or even be negative.

For defensive stocks, however, the profits will be much more consistent throughout the economic cycle regardless of the average consumers’ level of disposable income. If you want to find investments that can be held through thick and thin, here are three defensive names with the ability to please almost any individual investor.

North West Company Inc. (TSX:NWC)

While this grocer is unknown to many, shares of North West Company are probably the most defensive of the three companies presented in this article. With stores in the Canadian north and Alaska, the clientele and the sales are as consistent as any investor could ever ask for.

With a beta of 0.23 and a new acquisition in 2017, this company has provided investors a dividend yield between 4% and 5% on a consistent basis for several years. The expectation is that North West Company will continue to deliver for a number of years yet.

Loblaw Companies Limited (TSX:L)

Currently offering investors a dividend yield of approximately 1.5%, this grocery retailer is trading at approximately 30 times earnings and has performed very well in the past few years. With a dominant market position, investors may still have a lot to look forward to.

Metro, Inc. (TSX:MRU)

With a comparable yield, shares of Metro are trading at only 17 times earnings and may offer more upside potential given the company’s smaller footprint. Patient investors may experience the benefits of the company’s investments in long-term capital expenditures.

Long-term investors should remember defensive stocks bear lower risk than cyclical investments and often result in lower returns over the long term. Responsible investors will also remember the eighth wonder of the world: compounding. Assuming we continue with regular average compounded returns, this snowball may get pretty heavy.

The stocks of what is arguably Canada’s most boring industry may be the way to go.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Goldsman has no position in any stocks mentioned.

More on Dividend Stocks

analyze data
Dividend Stocks

Here’s Why the Average TFSA for Canadians Aged 41 Isn’t Enough

The average TFSA simply isn't enough for most Canadians in their early 40s. Here's how to catch up.

Read more »

cloud computing
Dividend Stocks

Insurance Showdown: Better Buy, Great-West Life or Manulife Stock?

GWO stock and MFC stock are two of the top names in insurance, but which holds the better outlook?

Read more »

concept of real estate evaluation
Dividend Stocks

How to Earn a TFSA Paycheque Every Month and Pay No Taxes on It

Canadian REITs can turn your TFSA into a monthly paycheque machine for life. Here's how Morguard North American Residential REIT…

Read more »

A plant grows from coins.
Dividend Stocks

The Smartest Dividend-Growth Stocks to Buy With $1,000 Right Now

New dividend-growth investors should consider CN Rail (TSX:CNR) stock and another top play if they're looking to build wealth over…

Read more »

Dividend Stocks

The 3 Top Canadian Stocks to Buy With $1,000 Right Now

If you want consistent income, look to consistent dividend payers. These three stocks are some of the best in the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Want a 6% Average Yield? 3 TSX Stocks to Buy Today

These stocks pay good dividends that should continue to grow.

Read more »

chart reflected in eyeglass lenses
Dividend Stocks

Is Alimentation Couche-Tard Stock a Buy for its 0.9% Dividend Yield?

Couche-Tard stock's small yield is not enticing, but its growth potential could be a wealth creator.

Read more »

Hourglass and stock price chart
Dividend Stocks

5.2% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades!

With its 5.2% dividend yield, Toronto-Dominion Bank (TSX:TD) is a stock I'm eagerly buying.

Read more »