All-Weather TSX Stocks for Every Market Climate

Amid the ongoing U.S.–Israel–Iran conflict and Iran’s announcement that it may block the Strait of Hormuz—through which roughly 20% of the world’s oil supply passes—crude oil prices have risen sharply in recent days. Higher oil prices could fuel inflationary pressures, potentially preventing or delaying the Federal Reserve’s anticipated interest rate cuts. At the same time, concerns about elevated fuel costs affecting global economic growth and causing supply chain disruptions have unsettled investors, triggering a pullback in Canadian equity markets. As a result, the S&P/TSX Composite Index has declined by about 4.2% from its recent highs.

With the conflict showing no clear signs of easing, I expect equity markets to remain volatile in the near term. In such an uncertain environment, investors should focus on strengthening their portfolios with high-quality defensive stocks that can provide stability and steady returns. Against this backdrop, here are two Canadian defensive stocks that I believe are well-suited for investors in any market environment.

Fortis

Utility companies provide essential services, including the transmission and distribution of electricity and natural gas, water supply, and sewage management. Given the critical nature of these services, their financial performance tends to be less sensitive to economic cycles and broader market conditions, enabling them to deliver stable, reliable returns. Against this backdrop, my first pick is Fortis (TSX:FTS), an electric and natural gas utility that operates nine regulated businesses across the United States, Canada, and the Caribbean. All of its assets are regulated, with about 95% involved in low-risk transmission and distribution operations, which adds significant stability to its financials.

Supported by this reliable performance, the utility company has delivered an average total shareholder return of 10.4% over the past 20 years, outperforming the broader market. It has also rewarded shareholders by increasing its dividend for 52 consecutive years and currently offers a forward yield of about 3.26%.

Meanwhile, energy demand in Canada could rise amid the electrification of transportation, the expansion of AI-ready data centres, and ongoing economic development, thereby expanding the addressable market for Fortis. To capitalize on these opportunities, the company is advancing its $28.8 billion five-year capital investment plan, which could grow its rate base at an annualized rate of about 7% to reach $57.9 billion by 2030. In addition, Fortis continues to focus on preventative maintenance and operational innovations to reduce costs and improve efficiency, supporting its long-term earnings growth.

Amid these expansion initiatives, management expects to raise the dividend at an annualized rate of 4–6% through 2030, making the stock an attractive defensive investment.

Waste Connections

Another defensive stock that can deliver reliable returns is Waste Connections (TSX:WCN), which provides non-hazardous solid waste management services. The company has expanded its presence across the United States and Canada through a combination of organic growth and strategic acquisitions. Over the past five years, it has completed around 100 acquisitions, which could contribute approximately $2.2 billion in annualized revenue. Despite its active acquisition strategy, the company maintains a healthy operating margin by focusing on secondary and exclusive markets, where competitive pressures are relatively lower.

Supported by these solid fundamentals, WCN has delivered an impressive average total shareholder return of about 16.2% over the past decade.

Moreover, backed by its strong balance sheet and robust cash flows, the company expects to continue pursuing acquisitions to expand its operations further. It currently has a strong acquisition pipeline, consisting of several private companies that could together generate roughly $5 billion in annual revenue. In addition, WCN is expanding its renewable natural gas portfolio by bringing five facilities into operation, while several additional projects could come online by the end of this year. The company also plans to open a new state-of-the-art recycling facility next year.

Considering its resilient business model and visible growth prospects, I believe WCN would be an excellent all-weather stock that deserves a place in a long-term investment portfolio.

The post All-Weather TSX Stocks for Every Market Climate appeared first on The Motley Fool Canada.

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More reading

• The Ideal Canadian Stocks to Buy and Hold Forever in a TFSA
• The Smartest Dividend Stocks to Buy With $1,000 Right Now
• 3 Must-Own Blue-Chip Dividend Stocks for Canadians
• Build Enduring Wealth With These Canadian Blue-Chip Stocks
• The 1 Canadian Dividend Stock I’d Hold Through Any Storm

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.