4 Canadian Stocks to Own When Markets Get Nervous

Markets get nervous when uncertainty rises faster than confidence. Recession fears, sticky inflation, unexpected geopolitical shocks, or simply higher volatility that makes future earnings harder to forecast — any of these can trigger a rotation out of highly leveraged, cyclical, or story-driven stocks and into businesses with steadier demand, stronger balance sheets, and more predictable cash generation. If you’re an investor looking to steady a portfolio when volatility picks up, here are four TSX stocks worth considering.

Alimentation Couche-Tard: A Global Retailer That Just Keeps Earning

Alimentation Couche-Tard (TSX: ATD) is a global convenience and gas station that tends to hold up in risk-off markets, since many of its purchases are habitual and traffic-driven. Over the last year, the biggest news was that ATD ended its bid to acquire 7-Eleven from a Japanese holding company. It also restarted a major share repurchase program of up to 77.1 million shares, about $4.2 billion’s worth.

In fiscal 2025 it reported net earnings per diluted share of $2.71 and repurchased 8.7 million shares for $518.9 million, while raising the annual dividend by 14.3% to CA$0.76. More recently, its Q2 fiscal 2026 adjusted net earnings were about $734 million and adjusted diluted EPS was $0.78. For a defensive investor, valuation looks reasonable at a P/E of 20. The stock pays a dividend yield near 1% at current prices.

Capital Power: Contracted Cash Flows and a 4.1% Yield

Capital Power (TSX: CPX) is an independent power producer with a portfolio of gas, renewables, and storage — often attractive during periods when investors want contracted cash flows tied to real electricity demand. Over the last year, it leaned hard into scale and cash flow visibility. The company completed its acquisition of the Hummel and Rolling Hills facilities for roughly $3 billion, adding 2.2 GW of U.S. gas generation. It also extended contracted cash flows by signing a new long-term contract for Midland Cogeneration Venture through 2040, and commissioned 170 MW of battery storage in Ontario contracted through 2047.

For full-year 2025, it generated adjusted EBITDA of $1.58 billion and adjusted funds from operations (AFFO) of $1.07 billion, with net income of $159 million. It also increased the common share dividend by 6%. For defensive investors focused on income, the 4.1% dividend yield should look pretty sweet.

Fairfax Financial: A Compounder With the Best Year in Its History

Fairfax Financial Holdings (TSX: FFH) is a property-and-casualty insurance group with a large investment portfolio. Over the last year, it posted what management called the best year in its history. Its 2025 net earnings were $4.77 billion, or $213.78 per diluted share, and book value per basic share rose to $1,260.19 as of Dec. 31. The TSX stock also declared an annual dividend of $20.77 per share payable in January 2026.

For an investor comfortable with a low headline yield (currently 0.9%), Fairfax offers something rare — strong earnings power at a reasonable P/E of 8. Fairfax’s combination of disciplined underwriting and rising investment income makes it a compelling defensive hold.

Empire Company: Grocery Staples and Steady Earnings When the Market Turns Cautious

Empire Company (TSX: EMP.A) owns grocery brands including Sobeys, Safeway, and FreshCo — a classic real-world demand business that can stay resilient when investors start avoiding rest, because people keep buying food. Over the last year, it showed steady earnings and cash flow while continuing buybacks and investing in the business. Most recently, it posted net earnings of $212 million in Q1 fiscal 2026 and $159 million in Q2 fiscal 2026, with Q2 sales of $7.99 billion, up 2.8%.

For a defensive investor looking for a trusty compounder rather than a high-yield hopeful, Empire’s 1.7% payout could be just the ticket.

Summary

When markets get nervous, the stocks that tend to hold up are the ones already earning in the real world. Couche-Tard keeps generating traffic and cash through habit. Capital Power keeps collecting contracted payments for electricity people still need. Fairfax keeps compounding through disciplined underwriting and investment income. Empire keeps selling groceries. None of these are immune to a broad selloff, but each has a built-in reason to matter more, not less, when the market turns cautious.

The post 4 Canadian Stocks to Own When Markets Get Nervous appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard and Fairfax Financial. The Motley Fool recommends Capital Power. The Motley Fool has a disclosure policy.