The Best Defensive Plays on the Canadian Market

Want portfolio protection? Three defensive Canadian stocks in apartments, waste services, and discount retail, can help steady returns during market volatility.

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Key Points
  • Canadian Apartment Properties REIT offers reliable monthly distributions and steady rental demand, making it a dependable defensive income play.
  • Waste Connections provides essential, recurring cash flow with dividends and buybacks, offering stability despite a higher valuation.
  • Dollarama’s low-cost retail model and international expansion support steady growth and resilience in downturns.

It’s time to get defensive, Canada. The markets are rising and Canadians need to start thinking about how to keep their investments safe. Why? Because when a market rises quickly, it can mean a turnaround. That’s why so many investors are actually putting their investments into gold as the price rises past US$4,000 per ounce.

But where should Canadian investors look? Today, we’re going to look at three top options investors can consider for not only today, but for years to come.

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CAR.UN

Canadian Apartment Properties REIT (TSX: CAR.UN) is an excellent option for those looking for defensive plays on the TSX today. The company owns, operates, and acquires multi-unit residential rental properties in Canada and Europe. The goal is to deliver stable monthly distributions, all while growing income and long-term unit value.

Because of this, it has grown a business that’s less exposed to commodity cycles and tied more to the residential rental market. And that strategy perfectly suits today’s investor. The defensive nature comes from a few areas. They include stable occupancy and rental demand, monthly distributions, a yield cushion, and acquisition activity.

Most recently, CAR.UN reported five acquisitions during the second quarter, with a monthly distribution totalling $1.55 per unit each year. Add in a buyback program, and this looks like one Canadian stock bound to keep your portfolio running.

WCN

Now residential property can be defensive, but if you really want essentials, look to Waste Connections (TSX: WCN). Garbage is simply a part of life, with stable, recurring demand that makes the core business less sensitive to economic swings. And this is seen quarter after quarter.

Most recently, the second quarter produced reported revenue of US$2.4 billion, up 7.1% year-over-year. Furthermore, management reiterated its full-year outlook, making it a prime option for those looking for defence this year at the very least.

What’s more, it also offers a dividend, along with a buyback program! The downside? Others have noted that this is a defensive stock to have on board, making it a bit pricier in terms of its price-to-earnings ratio. However, the necessity of its business, coupled with its long-term outlook, makes it a solid buy for those seeking protection in a downturn.

DOL

Finally, we have Dollarama (TSX: DOL), which is kind of surprising considering it’s a retail stock. The benefit? The Canadian stock focuses on low-cost retail items, operating a chain of dollar and value retail stores in Canada. What’s more, it has expanded through acquisitions.

Dollarama now operates globally, with Dollarcity in Latin America and recently the Reject Shop in Australia. The combination is profitable, with Dollarama stock looking to replicate its success at home in other countries. This has created a solid stream of income that isn’t slowing down.

Management remains confident, recently renewing its share buyback program. While not of the class of a high-yield defensive stock, it carries many of the characteristics that make it a solid stock compared to other retailers. While there is likely to only be modest upside, investors can look forward to slow-and-steady growth rather than dipping with the market.

Bottom line

Getting on the defensive can be one of the best moves for your portfolio. But that doesn’t mean you should sell everything and go for stocks like these. As always, discuss your options with your financial advisor to make sure your portfolio always aligns with your goals and risk tolerance.

Fool contributor Amy Legate-Wolfe 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.

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