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When investors hear the word recession, it can cause a lot of fear and concern. However, even with a slowdown in economic growth expected over the next year, there are still plenty of reliable Canadian stocks that you can buy and have confidence in holding through a recession.
Furthermore, not all recessions are equal. A few quarters of flat or slightly negative growth is much different than a significant slowdown of growth.
Often, a mild recession can actually be helpful to the economy, helping it to reset and get it back on the right track to continue growing in a healthy way.
Although a recession is certainly likely, here are three reliable Canadian stocks that you can own through a recession that will also return attractive passive income.
A top consumer staple stock
Consumer staples are companies that sell goods that are staples, such as food and essential household goods. These are some of the most reliable businesses you can own and are often only minimally impacted by a recession.
There are a few high-quality consumer staple stocks in Canada, but one of the best is North West Company (TSX:NWC) due to its impressive business model. North West owns grocery stores and supermarkets, mostly in remote regions in northern Canada and Alaska.
The regions North West operates in help to make it even more defensive, because it often faces little competition and therefore has a substantial market share.
Furthermore, in recent years, North West has improved its margins significantly. It’s done this by increasing the efficiency of its operations, selling off non-core assets, and bringing its own cargo airline in-house.
And thanks to those impressive margins, the stock pays an ultra-safe dividend, which, after its recent selloff, now offers a yield just shy of 4.6%.
That dividend has had a payout ratio of just 55% over the last 12 months, and, according to analysts’ expected earnings for North West over the next four quarters, the stock will have a payout ratio of just 59%.
So, even if North West is slightly impacted by surging inflation or a recession over the next year, its dividend is ultra-safe, and it’s one of the most reliable Canadian stocks you can own.
An ultra-cheap Dividend Aristocrat
Another excellent stock to buy that’s reliable enough to hold through a recession is Algonquin Power and Utilities (TSX:AQN).
As its name suggests, Algonquin owns many utility businesses that offer electricity, water and gas services. Utilities are incredibly defensive businesses. In Algonquin’s case, utilities account for about 70% of its operating earnings, which is why it’s so reliable.
It also owns renewable energy assets that generate power — another industry with highly reliable cash flow that has a significant long-term runway for growth.
Furthermore, Algonquin has also been looking to accelerate growth recently by initiating a capital-recycling program where it will sell off more mature assets and use the proceeds to invest in new growth projects.
Therefore, in addition to buying the stock while it’s cheap and offers a yield of 6.7%, it’s also a company with tonnes of long-term growth potential, making it one of the best Canadian stocks to hold through a recession.
One of the best Canadian real estate stocks to own through a recession
Many Canadian real estate stocks can be reliable businesses to hold through a recession, especially CT REIT (TSX:CRT.UN), a retail REIT with properties across Canada.
CT REIT is primarily owned by Canadian Tire and also receives nearly 90% of its revenue from the retailer, which is one of the reasons it’s such a reliable stock.
It’s more reliant on Canadian Tire, which could be a risk one day. But lately, Canadian Tire has been performing exceptionally well and is, therefore, an ideal tenant for the real estate investment trust (REIT).
Plus, not only is CT REIT’s revenue highly predictable, but it’s also an excellent stock to buy for growing passive income. In addition, CT REIT also has an attractive pipeline of growth projects that should only add to its long-term growth potential.
So, with the stock down roughly 20% from its high and offering a yield of nearly 6%, it’s one of the best Canadian stocks to own through a recession.
