When it comes to investing, there’s a way you can have your lunch and eat it, too—at least sort of. It’s called investing in low-volatility, low-beta, or simply defensive stocks.
These are companies that, for a variety of reasons, have historically held up better than the broader market during downturns like corrections or recessions.
Here’s a look at two TSX-listed stocks that fit the bill and an exchange-traded fund (ETF) that holds both, along with other defensive names.
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A grocery store
One defensive pick is Loblaw Companies (TSX:L), the parent company behind well-known brands like No Frills, Real Canadian Superstore, and Shoppers Drug Mart.
Loblaw is considered defensive because it sells inelastic products—groceries, household items, and prescriptions—that people continue to buy regardless of economic conditions. That steady demand helps stabilize its earnings even when the economy slows.
You can see this reflected in its five-year beta of just 0.10, meaning the stock has barely moved in relation to the broader market, making it one of the most stable names on the TSX.
Loblaw’s 1.06% dividend yield is modest, but with a low 28.4% payout ratio, there’s plenty of room for future dividend growth.
A utility provider
One utility I find attractive from a defensive standpoint is Hydro One (TSX:H), a regulated utility based in Ontario.
Like grocery stores, utilities benefit from inelastic demand—people still need electricity no matter what the economy is doing. But Hydro One goes a step further in stability because it focuses on transmission and distribution, not power generation, which tends to be more volatile and capital intensive.
It’s also majority-owned by the Ontario government, adding another layer of security and oversight. While utilities, in general, carry risks tied to debt levels and natural disasters, Hydro One is less exposed than peers operating in hurricane-prone regions like Florida or relying heavily on renewables with uncertain output.
Right now, the stock has a beta of just 0.35, signalling relatively low volatility, and offers a 2.58% dividend yield—not sky high, but consistent and backed by a stable cash flow base.
Buy them both and more with this ETF
My preferred way to invest defensively is through BMO Low Volatility Canadian Equity ETF (TSX:ZLB).
ZLB holds 53 Canadian stocks, including both Hydro One and Loblaw, all carefully screened for low beta, meaning they tend to move less than the market during periods of volatility.
As of March 24, 2025, the ETF pays a 2.28% annualized distribution yield with a 0.39% management expense ratio.
But what might surprise you is that ZLB hasn’t just protected investors—it’s outperformed. Over the past 10 years, it’s delivered a 9% annualized return, beating the broader S&P/TSX 60 Index while taking on less risk.
