3 “Risk-Off” Dividend Stocks You Won’t Regret Buying Amid the Correction

Fortis Inc. (TSX:FTS)(NYSE:FTS) is just one of many unfairly hit stocks that could help investors build a solid foundation to combat an imminent recession.

| More on:

It’s never too late to play defence, even after the vicious 12% correction in the U.S. markets.

Like in sports, defence is capable of winning championships, and given the stocks of many “Steady Eddie” defensive dividend stocks (or bond proxies) have failed to hold their own over the past week anyway, it may make sense to grab your favourite defensives at a nice discount if you’re ready to take some risk off the table heading into what could be the end of one the longest bull markets.

Without further ado, consider the following dipped defensive plays to batten down the hatches of your portfolio.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is a prime example of stock you’d want to own if you think the world is going to end. As the global markets look to flirt with bear market territory, it’d only make sense that the price of admission to such a high-quality bond proxy would go up, not down. But that’s the kind of panic-driven market we find ourselves in right now. Not even Fortis, a business that some consider a best-in-breed bond proxy, is immune to the recent correction.

As you may remember, during the Financial Crisis, Fortis stock still fell but to a lesser degree, and the stock was quick to bounce back when investors came to their senses. While it’s good to hope for the best, sometimes you’ve just got to prepare for the worst, and that’s why you’d be wise to buy Fortis if you don’t already have a defensive foundation.

At the time of writing, Fortis shares are down 3.5% in a week, and as the TSX halt is lifted, we could see the robust bond proxy down at a 5% discount.

Algonquin Power & Utilities

Up next, we have renewable energy kingpin Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN), which tumbled 6% on the week. The 3.5%-yielding company has stable cash flow-generative projects that could fuel many years worth of double-digit revenue growth. Moreover, with the “green tailwind” to its back, Algonquin is able to get projects up and running a lot quicker than many other firms that may have more hurdles to pass.

After the modest pullback, which is in line with the drop in the TSX Index, the stock trades at 19.8 times trailing earnings, 2.5 times book, and 4.7 times sales. It’s hardly a cheap stock, but given Algonquin is a growthy (and stable) business that doesn’t depend on the outcome of exogenous events that have been troubling the broader markets, I’d say any dip in Algonquin is a buyable dip.

Hydro One

Finally, we have Hydro One (TSX:H), quite possibly the “most secure” utility stock on this list. The company has a virtual monopoly over Ontario’s transmission lines, and although growth will be hard to come by, the company is still sought after in the face of a recession. The company will still collect its monthly dues from its customers, regardless of what ends up happening to the domestic or global economy.

Hydro One has a ridiculously low 0.14 beta and is less likely to fall at the same magnitude of the broader markets given the highly regulated nature of its operations. Despite the recession-resilient nature of the company, shares are still down nearly 6% for the week.

At 21.8 times trailing earnings and 2.6 times sales, Hydro One is hardly a cheap stock given its lacklustre growth profile, but given the hunt for yield is getting tougher, with bond yields continuing to plunge in the flight to safety, I’d say the premium is well worth the price of admission.

I guess you could say Hydro One is one of those stocks that can buoy your portfolio and stop you from downing when the market waters start getting really rough!

Stay hungry. Stay Foolish.

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 Joey Frenette owns shares of FORTIS INC.

More on Investing

A plant grows from coins.
Tech Stocks

3 Growth Stocks Wall Street Might Be Sleeping on, But I’m Not

Don’t miss your chance to load up on these three beaten-down stocks.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, November 5

Updates related to the U.S. presidential election will remain on TSX investors’ radar today as the third-quarter corporate earnings season…

Read more »

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

stock research, analyze data
Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

There are opportunities and risks on the horizon for the Canadian banks.

Read more »

Young Boy with Jet Pack Dreams of Flying
Stock Market

Is Air Canada Stock a Good Buy After Its Q3 Results

Down almost 60% from all-time highs, Air Canada is an undervalued TSX stock that remains an enticing investment in November…

Read more »

cloud computing
Investing

Where to Invest $10,000 in November

Given their solid underlying businesses and healthy growth prospects, I expect these two defensive stocks to outperform uncertain outlook.

Read more »