You Probably Own 1 of These Top Canadian Stocks, But How Safe Is It?

We examine three classically defensive stocks and ask: are Suncor Energy Inc. (TSX:SU)(NYSE:SU) and two others stable enough to hold long-term?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Much is being written at the moment about the defensiveness of Canadian stocks; to a large degree, this denotes a certain nervousness of investors. As a number of potentially catastrophic stressors mass on the horizon, domestic portfolio owners want to know that their investments are secure.

With this in mind, let’s take three of the most defensive stocks on the TSX, commonly held to give investors security in the face of economic uncertainty, and see just how fit for purpose they are. To do so, several factors will be taken into consideration: market cap, dividends, debt, past performance, and value as per the P/E ratio.

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS)

The Bank of Nova Scotia had a great run of it this summer, beating expectations and generating any number of investment think-pieces. With a market cap of $96 billion, Bank of Nova Scotia is big – but not the biggest bank on Bay Street. Its P/E of 11.3 times earnings beats the Canadian banking brigade and the TSX itself, however.

A one-year past earnings growth of 5.6% can’t match the industry average of 10% for the same period, and falls just shy of its own five-year average past earnings growth of 5.5%. That said, its dividend yield of 4.41% is pretty good, and the bank holds an acceptable proportion of non-loan assets.

Canadian National Railway (TSX:CNR)

If you like your infrastructure stocks, Canadian National Railway has to be one of the most sturdy. With a market cap of $82 billion, it’s one of the more sizeable stocks, and a good fit for this list. While a P/E ratio of 15.1 times earnings is good for a Canadian stock in general, bear in mind that the industry average is 12.3 times earnings, so you will be paying over the odds at today’s price.

A one-year past earnings growth of 43.9% trails the industry average of 183.4% for the same period, though it beats its own five-year average past earnings growth of 14.6%. A dividend yield of 1.6% is pretty small; however, in terms of liability, its proportional debt of 68.4% of net worth could be worse.

Suncor Energy (TSX:SU)(NYSE:SU)

If you are a fan of defensiveness in a portfolio, chances are you hold shares in Suncor Energy. Its market cap of $83 billion qualifies it as a sufficiently sizeable asset to hold long-term, while its P/E of 18.6 times earnings, conversely to Canadian National Railway’s same ratio, beats the industry but trails the market. This is probably a better way around, though, as it shows that Suncor Energy can go head-to-head successfully with its competitors, unlike the previous stock.

A one-year past earnings growth of 63.5% far excels the industry average of 0.5% for the same period; likewise, it betters its own five-year average for past earnings growth of -3.4%. While a dividend yield of 2.87% could be a touch higher, a debt level of 39.8% of net worth is acceptable.

The bottom line

If you own the three stocks listed above, it appears that you’re in good hands. If you’re thinking of buying, Suncor Energy looks like the strongest play today, with the railway stock being somewhat of a weak link in terms of both dividends and past performance.

 

Should you invest $1,000 in Parex Resources Inc right now?

Before you buy stock in Parex Resources Inc, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Parex Resources Inc wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Victoria Hetherington has no position in any of the stocks mentioned. CN is a recommendation of Stock Advisor Canada.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

The 1 Canadian Stock I’d Buy and Hold Forever in a TFSA

This Canadian stock is a strong option for any TFSA, and here's why.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,267 in Annual Passive Income

Dividend stocks are strong options, but these two could be some of the best long-term options.

Read more »

investor looks at volatility chart
Dividend Stocks

I’m Adding This 12% Dividend Stock for a Recession-Resistant Portfolio

Despite boasting such a high dividend yield, this 12% dividend yield stock might be an excellent pick to build your…

Read more »

Make a choice, path to success, sign
Dividend Stocks

1 Undervalued TSX Stock Down 51% to Buy and Hold

This TSX stock plunged, but don't count it out, especially at these prices.

Read more »

dividends can compound over time
Dividend Stocks

How I’d Invest $50,000 of TFSA Cash in 2025

If you have $50,000 to invest in a TFSA, here's how to get started.

Read more »

analyze data
Dividend Stocks

Why I’d Focus on Canadian Value Stocks for My Long-Term Portfolio

Canadian value stocks often provide income and growth that makes them great for long-term investing.

Read more »

woman looks at iPhone
Dividend Stocks

Investing $7,000 in Your TFSA? Consider These 2 Canadian ETFs for Retirement Planning

These two Canadian ETFs can be excellent long-term investments to add to your TFSA if you have contribution room available.

Read more »

ways to boost income
Dividend Stocks

Where I’d Invest $5,000 in Canadian Value Stocks During This Market Pullback

For patient, long-term investors, here are three discounted TSX stocks to have on your watch list right now.

Read more »