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Building a completely recession-proof portfolio may be challenging, but you can enhance its resilience by incorporating businesses that tend to be less affected during economic downturns. Selecting companies that demonstrate stability or act as hedges against market volatility can contribute to a more robust portfolio. Here are two TSX dividend stocks that can add resilience to your investment strategy:
1. Utility Company: Fortis Inc. (TSX:FTS)
Utility companies typically display resilience during recessions due to the essential nature of their services. Fortis, a leading utility company in Canada, is a strong choice for various reasons. With an international presence and operations in 10 different utility segments, TSX FTS serves over 3.4 million consumers across multiple countries. Approximately 99% of its utility assets are regulated, providing an additional layer of security to its revenue streams.
Fortis has a remarkable track record of dividend growth, boasting 49 consecutive years of dividend increases. The stock's dividend yield is currently around 4.2%, offering a decent income stream. While utility stocks may not experience rapid growth, they provide stability and consistent returns over time, making them suitable for a resilient portfolio.
2. Gold Mining Company: Agnico Eagle Mines Ltd. (TSX:AEM)
Gold is a traditional hedge against market uncertainties and often performs well during market downturns. Agnico Eagle Mines is an international gold producer with operational mines in Canada, Mexico, and Finland, along with exploration facilities in Colombia and the United States. With a history dating back to 1957, Agnico has demonstrated consistent production levels over the years.
Gold stocks, including TSX AEM, tend to exhibit resilience during market crashes and recessions. While their performance may lag during bullish market conditions, they can serve as a valuable hedge in a downturn. Agnico Eagle Mines recovered relatively quickly from the impact of the last recession and may offer similar resilience in future economic challenges.
It's essential to be aware of the potential downsides, as gold stocks may underperform in robust market conditions. Agnico's 40% decline from its 2020 peak is an example of such fluctuations. However, this decline has led to a relatively attractive valuation and a modestly high yield of 3.3%.
In conclusion, incorporating utility stocks like Fortis and gold mining stocks like Agnico Eagle Mines into your portfolio can enhance its resilience during economic recessions and market downturns. While these stocks may not provide explosive growth in bullish markets, they offer stability and act as protective components during challenging economic conditions.
