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Looking for safe stocks to ride out stock market volatility?
If so, you’re probably making a smart move. Interest rates are rising rapidly this year, and that makes risky assets (eg tech stocks and cryptocurrencies) undesirable. The higher the interest rates, the more “risk-free” returns you can earn. That makes taking risks less sensible and prompts investors to demand lower prices for risky assets.
Sometimes, when interest rates get too high, institutions put all their money in Treasury bonds (ie government debt). For retail investors, the closest comparable strategy is to invest in money market funds (Treasury funds) or GICs (bonds issued by banks whose returns are similar to those of the treasury). The safest strategy is to invest in GICs and broad market index funds. If you’re more interested in buying individual stocks, read on, because in this article I’ll explore three of the safest TSX stocks right now.
fortress (TSX:FTS)(NYSE:FTS) is a Canadian public utility company with a 48-year track record to increase its dividends. It has generated decent growth over the last decade, increasing its earnings from $363 million to $1 billion. Over 90% of Fortis’ business is regulated, creating barriers to entry that protect the company.
Government regulations make it difficult for new companies to enter a business, protecting established players – Fortis and other utilities benefit from this. In addition, Fortis services are indispensable. It is primarily in the business of providing electricity, a service that is usually subject to long-term contracts, so the revenue keeps coming, even during recessions. People can cut back on heating and lighting use in a recession, but they won’t do it completely.
Most of these points apply to all utilities, not just Fortis, but consider the growth track record I mentioned: Fortis has nearly tripled its profits over the last decade. Not all utility companies are growing this fast.
Brookfield Asset Management
Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) is a Canadian asset management company that has performed very well for the past decade. Since 2012, the company has
- Increased your income by 340%;
- He grew his profits by 180%; Y
- It grew its dividend by 9% per year.
This is a good growth record. And there are reasons to think that it could continue. Brookfield is investing in real estate, renewable energy, and infrastructure, all of which are good long-term industries. In addition, the company owns a 63% stake in Howard Marks’ Oaktree Capital, a bond investment firm that has beaten the market for many decades. Overall, Brookfield offers a great mix of strong financial and management skills.
Royal Bank of Canada (TSX:RY)(NYSE:RY) is one of Canada’s oldest and most trusted banks. It was founded 158 years ago and has been paying dividends for over 100 years. Royal Bank of Canada has survived World War I, World War II, the Cold War and the COVID-19 pandemic. It has not suffered a serious risk of failure through all those risky events.
Today, you can buy Royal Bank of Canada stock, lock in a 4% dividend yield, and potentially watch it grow over time. It is a great stock for defensive investors.