On Tuesday, the U.S. Labor Department announced that job openings in June stood at 9.58 million, slightly lower than the 9.62 million in May. Layoffs also fell from 1.55 million to 1.53 million, indicating that the labour market is stabilizing. Besides, the manufacturing sector, which continues to be in contraction, reported declining job openings and hiring. Although many believe that the recession fears are over, the continued decline in the manufacturing sector has raised uncertainty.
Amid these announcements, the S&P/TSX Composite Index fell 1.5% yesterday. So, given the uncertain outlook, here are two safe TSX stocks that you can buy to strengthen your portfolio.
Dollarama
Dollarama (TSX:DOL) operates 1,507 discount retail stores across Canada, offering a wide range of products. It has adopted a direct sourcing model, thus reducing intermediary expenses and increasing its bargaining power. So, the company is able to offer its products at attractive price points. Given its expanded product offerings, compelling value propositions, and extensive store network, the company has continued to deliver impressive same-store sales growth even in this high-inflation environment.
Meanwhile, the discount retailer enjoys a quick sales ramp-up period, with its new stores achieving average annual sales of 2.9 million within two years of opening. Also, the payback period for its stores stands at less than two years, thus resulting in low-capital intensity and high return on investments. Additionally, the company plans to add around 593 stores over the next eight years to increase its store count to 2,100 by the end of fiscal 2031.
Besides, Dollarama could also benefit from increased contributions from its 50.1% stake in Dollarcity, as it plans to expand its store count by 402 units to 850 stores by 2029. So, given its growth prospects and the essential nature of its business, I believe Dollarama could strengthen your portfolio amid this volatile outlook.
Fortis
Fortis (TSX:FTS) is an energy delivery company, with around 93% of its assets involved in low-risk transmission and distribution of electricity and natural gas. Since about 100% of its business is regulated, it generates stable and predictable financials irrespective of the state of the economy. Meanwhile, the company has delivered over 10% of returns in the last 10 years at a CAGR (compound annual growth rate) of 9.6%. Also, the utility owner and operator has boosted shareholders’ returns by raising its dividend uninterruptedly for the previous 49 years. With the company currently paying a quarterly dividend of $0.565/share, its forward yield stands at 4.08%.
Meanwhile, Fortis is looking to expand its asset base and plans to invest around $22.3 billion from 2022 to 2027. It expects to meet 57% of these investments through the cash generated from its operations, 10% from DRIP (dividend reinvestment plan), and the remaining 33% from external debt. So, these investments won’t increase its debt levels significantly.
Meanwhile, these investments could grow its rate base at a CAGR of 6.2% through 2027. The expanding rate base, solid underlying businesses, and favourable rate revisions could boost its financials in the coming years. So, the company’s management is confident of raising its dividends by 4-6% annually through 2027. Considering that its stable cash flows and healthy growth prospects could continue to support its impressive dividend growth record, I believe Fortis would be a perfect buy in this volatile environment.
