Cash-Rich Canadian Companies That Thrive in Economic Downturns

In the next market correction, the biggest gains may go to investors in the predators that dominate investment markets during economic downturns. These cash-rich companies often do better than an average TSX stock that simply “holds on.”

History shows that economic downturns are not just periods of “destruction”; they are the greatest wealth-building windows for those with the right ammunition. While the average Canadian stock may be slashing dividends and begging the big banks for liquidity, a select few Canadian giants will be playing offence — buying distressed assets, acquiring competitors, and swallowing market share whole.

Here are three cash-rich TSX stocks with the balance sheets to turn a recession into their most profitable era yet. You may wish to buy and hold some or all of them to fortify your core portfolio.

Brookfield Corporation (BN)

If a recession triggers a fire sale on otherwise valuable assets, Brookfield Corporation (TSX:BN) is the tough guy walking into the deal room with a briefcase full of cash. Going into 2026, the $147 billion alternative asset management juggernaut has amassed a US$180 billion asset base that’s supporting BN stock’s cash flow generation capacity, positioning the multi-asset manager for another multi-year growth spree.

Brookfield’s managed portfolio’s 30-year performance history, created right through three North American economic downturns, printed a 19% compound annual return that could have turned a $1 million investment into a $285 million wealth pile.

Brookfield invests in real estate and infrastructure assets, and it also thrives on economic dislocation. When credit markets freeze and asset prices collapse, desperate sellers go to the likes of Brookfield. BN has the power to cherry-pick the best infrastructure and real estate assets at crisis pricing during downturns.

An $10,000 investment in BN stock since 2001 could have grown into $636,000 today – despite the past economic downturns.

Constellation Software: The vulture of the tech sector

Constellation Software (TSX:CSU) buys software companies with defensible moats. The subsidiaries usually continue to generate boatloads of cash flow that enrich their parent’s cash position, even during economic downturns. The excess cash is mostly allocated toward new acquisitions of cash flow positive targets in a self-reinforcing strategy that remains a strong growth pillar for the business today.

Constellation stock’s business model is brilliant in its simplicity: acquire vertical market software (VMS) businesses, run them efficiently, and never sell them. However, during an economic boom, these “tuck-in” acquisitions get expensive. When a recession hits, smaller software vendors start to sweat. Their revenue stalls, their lines of credit dry up, and they become “willing sellers” at reasonable multiples.

CSU’s self-replenishing cash hoard allows it to go on a shopping spree exactly when valuations contract. This is how founder Mark Leonard built the empire. The tech stock has declined by 51% over the past year, spooked by the founder’s departure on health grounds. But the business model remains very intact, with nearly $4 billion in liquid cash assets to finance the next lucrative deals.

Enbridge

Utilities and pipelines appear as boring stocks, but in a recession, boring becomes beautiful.

Enbridge (TSX:ENB) is an oil and gas pipeline giant whose capital expenditure budgets are largely self-funded. Its real cash flow power lies in its business model. As the transporter of the energy that heats homes and fuels trucks, Enbridge’s revenue is largely volume-based, not price-based. Whether oil is at $100 or $50 per barrel, hydrocarbon molecules still need to move through Enbridge’s expansive pipeline network. New ventures into gas utilities support cash flow stability.

With tight take-or-pay contracts, Enbridge’s revenue and cash flow stability support its ever-growing generous dividend. The Enbridge dividend currently yields 5.5%, and remains well supported by internally generated cash flow, even when the economy stumbles.

If overvalued tech stocks and crypto get crushed during downturns, investors will flock to the safety of ENB stock’s yield. Moreover, with its strong liquidity, Enbridge can continue its “secured growth” capital program, building the very infrastructure that will fuel dividend hikes for the next decade, while highly levered competitors are forced to halt construction projects.

The post Cash-Rich Canadian Companies That Thrive in Economic Downturns appeared first on The Motley Fool Canada.

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Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield. The Motley Fool recommends Brookfield Corporation, Constellation Software, and Enbridge. The Motley Fool has a disclosure policy.