5 TSX safe stocks that can help weather inflation effects

Highlights

• TransAlta is set to deliver a quarterly dividend of C$ 0.05 on July 1.
• Dollarama help a return on equity (ROE) of about 496 per cent.
• Winpak posted an increased revenue of US$ 275.98 million in Q1 FY2022.

Fear of rising inflationary pressure could lead equity investors to quality, safe stocks that could mitigate the impact of high living costs. 

Rocketing energy and food prices pushed up consumer price index (CPI) by 6.8 per cent in April this year compared to 2021, according to Statistics Canada. Hence, many investors are looking to adjust their investment portfolio and compile TSX stocks that are likely to withstand the inflationary environment.

Here are five TSX stocks that investors can explore if looking to allocate money to safe investment options.

1.    TransAlta Corporation (TSX: TA)

TransAlta Corporation is the owner and operator of over 70 power plants in the western US, Canada and Australia. The Canadian power producer also generates renewable energy from hydroelectric plants and wind farms. In addition, the mid-cap utility company also holds natural gas transmission lines.

The company advanced its MSCI Environmental, Social, and Governance (ESG) rating from BBB to A, reflecting significant growth in the renewable energy front relative to its peers, said TransAlta Corporation. The utility company added that it increased its renewable energy capacity by 15 per cent by acquiring and building solar and wind farms and other clean energy projects.

TransAlta Corporation is also set to deliver a quarterly dividend of C$ 0.05 on July 1, which could be another key factor to consider while investing in safe stocks.

Also read: CVE, CPG, SU: 3 TSX energy stocks that are soaring this year

2.    Dollarama Inc (TSX: DOL)

Consumer defensive stocks like Dollarama could be another option to beat inflation. Dollarama owns and manages discounted retail stores across the nation, including metropolitan areas, cities and small towns. This Canadian retail company held a market capitalization of over C$ billion with a return on equity (ROE) of about 496 per cent, indicating profitability.

Dollarama also distributes quarterly dividends (currently C$ 0.055 per share payable on August 5).

3.    Ritchie Bros. Auctioneers Incorporated (TSX:RBA)

Ritchie Bros. Auctioneers Incorporated is a mid-cap company engaged in auctioning heavy equipment with over 40 live sites. The company began its journey by auctioning industrial equipment and now has extended its operations globally to construction, transportation, agriculture, and oilfield equipment.

The C$ 8-billion market cap company held regional auctions in the US and Canada last month on May 31 and sold equipment worth more than US$ 92 million from 11 locations.

The Canadian business service company also offer a dividend of US$ 0.25 every quarter (scheduled for June 17).

4.    CAE Inc (TSX: CAE)

CAE Inc provides training solutions to the aerospace, defence, and healthcare sector. The industrial company reported a year-over-year (YoY) rise of 13 per cent to C$ 3.37 billion in its 2022 revenue. Its quarterly revenue jumped by seven per cent in Q4 FY2022 compared to Q4 2021.

CAE’s price-to-earnings (P/E) ratio of 67.9 reflects high share price expectations based on its earnings.

5.    Winpak Ltd (TSX: WPK)

Winpak Ltd produces and sells packaging materials and containers mainly utilized in perishable food and healthcare products. Additionally, this firm also provides packaging machines.

On the financial front, Winpak posted a revenue of US$ 275.98 million in Q1 FY2022, higher than US$ 224.80 in the same period of 2021.

The C$ 2.5-billion market cap company also increased its net income to US$ 33.87 million in the latest quarter compared to C$ 24.49 million in Q1 2021.

Bottomline

Canadian equity investors can explore these TSX stocks to curb inflationary impacts. Stocks like TransAlta Corporation and Dollarama can survive economic difficulties as they are less cyclical and defensive in nature. New developments in clean energy and green packaging could also put TransAlta Corporation and Winpak Ltd in an advantageous position.

Also, some mid-cap stocks mentioned above could provide significant returns in the future as they have more room to grow compared to large-cap stocks.

Also read: 2 TSXV energy stocks to buy under $10 TSX as OPEC+ raises output

Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.