Bear Market: 2 Safe TSX Stocks to Buy Right Now

TSX stocks like Hydro One (TSX:H) are in a safer position.

| More on:
A bull and bear face off.

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

The S&P/TSX Composite Index dropped another 5% this week, intensifying the bear market. Even dividend stocks and energy producers are no longer safe. However, these two TSX stocks could be better positioned for the economic pain ahead. 

Stock #1

Amid the selloff, Hydro One (TSX:H) is holding up better than the rest of the market. The stock is down by about 4.5% year to date, while the TSX index is down 14.5% over the same period. That’s probably because utility companies are recession resistant. Consumers pay their utility bills regardless of economic conditions. 

The electricity transmission and distribution company boasts of a decent customer base of 1.4 million consumers in residential and commercial areas. Ahead of the winter the company is poised to enjoy booming business amid a surge in energy demand.

The company’s financials are in good shape, too. It generated earnings of $0.43 a share, representing a 7.5% year-over-year increase.

The strong demand for hydro power has seen Hydro One generate significant cash flow to sustain dividend payouts. The company spots a solid 3.2% dividend yield. Despite the 9% year-to-date gain, the company still trades at a discount with a price-to-earnings multiple of 20, which is well below the industry average of 30.

Stock #2

TransAlta Renewables (TSX:RNW) is another underrated TSX stock that should be on your radar now. 

This is an interesting energy play, as the world slowly transitions to cleaner and greener energy. The stock has underperformed the overall market going by the 31% year-to-date decline. The TSX, however, is down by about 14.5%. Despite the underperformance, the company’s long-term prospects and growth metrics remain as strong as ever.

TransAlta boasts of a growing portfolio of renewable energy assets distributed worldwide.

The company operates a solid and defensive business with tremendous long-term growth potential. Its renewable energy-generating assets have long-term and regulated contracts capable of generating solid and predictable cash flows. Revenue-per-share growth has been on a roll, increasing by 14.5% over the past year helping support robust free cash flows

In the first half of the year, TransAlta’s free cash flow was up 14.7% to $195 million. The company is well poised to generate more free cash flow heading into year end following the addition of Windrise and North Carolina Solar facilities to its portfolio. The company currently pays a 5.37% dividend yield that should be attractive for passive-income-focused investors.

While TransAlta is trading at a price-to-earnings multiple of 27, it is still trading at a discount given the industry average of 30. Additionally, the recent 31% decline provides an opportunity to buy the stock at a discount for its dividend.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

Investing

KM Throwaway Post

Read more »

Investing

Carlos Test Yoast Metadata

Read more »

Investing

KM Ad Test

This is my excerpt.

Read more »

Investing

Test post for affiliate partner mockups

Updated: 9/17/2024. This post was not sponsored. The views and opinions expressed in this review are purely those of the…

Read more »

Investing

Testing Ecap Error

Premium content from Motley Fool Stock Advisor We here at Motley Fool Stock Advisor believe investors should own at least…

Read more »

Investing

TSX Today: Testing the Ad for James

la la la dee dah.

Read more »

Lady holding remote control pointed towards a TV
Investing

2 Streaming Stocks to Buy Now and 1 to Run From

There are streaming stocks on the TSX that are worth paying attention to in 2023 and beyond.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Stocks for Beginners

Top Recession-Resilient TSX Stocks to Buy With $3,000

It's time to increase your exposure to defensives!

Read more »