4 Recession Proof Stocks To Build Your Portfolio

Summary

• Recession-proof stocks can survive difficult economic circumstances and manage to grow on their own despite situations such as the pandemic-induced lockdown.
• Traditionally, consumer staples, healthcare and utilities have been labeled as recession-proof sectors.
• Investors need to divert funds in recession-resistant stocks to safeguard their income.
• We look at four stocks that have proven their sturdiness in the face of pandemic and are likely to continue performing well.

Recession-proof stocks can widely be categorized as shares of companies that continue to thrive during an economic downturn, such as the current pandemic stock market. Certain industries such as consumer goods and food and beverages have been deemed as recession-resistant stocks since they are identified under essential commodities.

Recession-proof stocks are most likely to endure difficult economic circumstances and emerge victorious, growing on their own, despite situations such as the lockdown.

In Canadian equity market, gold and tech stocks have soared in the face of COVID, posting stellar returns than that of the broader TSX index that has declined over two percent this year. But traditionally, consumer staples, healthcare and utilities have been labeled recession-proof sectors. In the current market, discount retailers, grocers and several utility stocks have continued to fare well.

As the economy maps its way out of the COVID-induced recession, investors need to divert funds in safe haven that won’t prove to a bitter bet in the future. But this recession seems different from its predecessors, proving to be more difficult on some sectors than others.

Here are four stocks that have proven themselves in the face of pandemic and are likely to continue performing well.

Dollarama Inc (TSX:DOL)

This consumer good stocks has whipped out wonderful gains amid pandemic and lockdown times. Stocks of value retailer Dollarama have yielded nearly 10 percent returns this year, as compared to the broader TSX index that declined by (minus) 2.39 percent year-to-date (YTD).

Dollarama’s shares have gained over 16 percent in a quarter and 3.37 percent in a month.

The discount retail store chain has two subsidiaries – Dollarama L.P and Dollarama International Inc, with stores spread across 1,200 locations. Last year, the company acquired a majority stake in Latin American retail chain Dollarcity, which has stores in Colombia, Guatemala and El Salvador.

Dollarama’s core business has profited during pandemic as consumers rushed to stockpile essential items. Its online space has also boomed during the COVID.

The C$ 15.3 billion-company announced C$ 0.044 quarterly dividends. Its current P/E Ratio is 28.20 and dividend yield is 0.355 percent.

Waste Connections Inc. (TSX:WCN)

Services of integrated waste management firm Waste Connections has proved among the essentials of the modern life. Stocks of the garbage pickup and trash recycling firm has soared by over 11 percent this year. The scrips have advanced by 3.7 percent in a quarter and nearly 6 percent in a month.

However, Waste Connections’ stock prices have declined since August 6, after the company posted its second quarter 2020 results. The revenue stood at US$ 1.305 million in Q2, down from US$ 1.369 million a year ago. Despite that, the company’s 2020 outlook looks robust. It estimates that the revenue will grow to US$ 5.325 billion in 2020, as the pandemic restrictions ease.

Waste Connections’ current market cap is above C$ 34 billion and pays quarterly dividends of US$ 0.185 and has dividend yield of 0.748 percent.

Empire Company Limited (TSX: EMP.A)

Here’s another consumer stock that has proved to be recession-proof in COVID times. Scrips of Empire Company Limited has gained by over 17 percent this year. The stock price has advanced by 19 percent in a quarter and nearly 15 percent in a month.

The food and beverage company owns retail giant Sobeys Inc and other top brands such as Foodland, FreshCo, Safeway, IGA, Thrifty Foods and Lawton's Drug Stores. The grocery chain’s primary income source is Sobeys. It generates annual sales of about C$ 26.6 billion.

The C$ 6 billion-grocery chain paid C$ 0.13 per share quarterly dividend to the shareholders. Its current dividend yield is 1.45 percent and P/E ratio is 16.60. The stocks were trading above C$ 35.8 at the time of filing this story.

TransAlta Renewables Inc. (TSX:RNW)

Shares of this electric utility company has been trading flat this year. But on the quarterly and monthly scales, TransAlta Renewables shares have advanced by 10 percent and 9 percent, respectively. The C$ 4 billion-utility firm has announced C$ 0.07833 monthly dividends. Its current dividend yield is 5.979 percent while P/E ratio is 40.1.

The company generates electricity from renewable resources and maintains 19 wind farms, 13 hydro facilities and a natural gas plant.

In the second quarter 2020, the company’s EBITDA increased to C$ 115 million, up 4 percent from same period last year. Adjusted funds from operations soared C$ 90 million, up by C$10 million last year. It ended the quarter with C$ 498 million in liquidity, including C$ 29 million cash in hand.