14 Best Defensive Stocks in Canada for June 2024

“No risk, no reward.” That’s the first lesson every investor and trader should learn.

Broad market ETFs that follow indexes like TSX and NASDAQ are not impervious to market crashes and recessions.

You can hedge your bets, though. A lot of safety lies in the best defensive stocks in Canada.

Even if you are completely untrusting of the market and stocks, defensive stocks can provide a good alternative to holding cash or bonds.

What Are Defensive Stocks?

The most widely accepted definition of defensive stocks is that they tend to offer consistent earnings and dividends, whatever the market conditions are.

Simply put, these are businesses that provide services and products whose demand remains constant, regardless of whether the market is soaring or crashing, like utilities and consumer staples.

Defensive stocks have different traits:

  • They tend not to dip too much when the market crashes or recover sooner than the broader market.
  • Their earnings remain relatively consistent through financially difficult times.
  • A lot can maintain their dividends regardless of market conditions, and the payout ratios remain relatively safe.
  • Have evergreen business models

A great example of a systematic approach to the assessment and screening of Canadian defensive stocks can be seen in this video.

These traits usually point you towards stocks that have been in the market for long (at least a decade or so), are large-cap or mid-cap blue-chip companies, are usually dividend aristocrats, and most often leaders within their sectors and industries.

Best Defensive Stocks In Canada

We have chosen these defensive stocks in Canada not just based on how they performed during various market crashes in the last two decades but also based on their return potential.

  • Alimentation Couche-Tard (ATD.TO)
  • Emera (EMA.TO)
  • BCE (BCE.TO)
  • Canadian National Railway (CNR.TO)
  • Thomson Reuters (TRI.TO)
  • Brookfield Asset Management (BAM.TO)
  • Canadian Apartment Properties REIT (CAR-UN.TO)
  • Enbridge (ENB.TO)
  • Toronto Dominion Bank (TD.TO)
  • Waste Connections (WCN.TO)
  • Metro (MRU.TO)
  • OpenText (OTEX.TO)
  • Constellation Software (CSU.TO)
  • Franco-Nevada (FNV.TO)

1. Alimentation Couche-Tard Stock

Alimentation Couche-Tard Stock
  • Ticker: ATD.TO
  • Sector: Consumer Staples
  • Industry Niche: Food And Staples Convenience Stores
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 0.77%
  • Dividend Payout Ratio: 12.44%
  • Dividend Yield (12-Month Trailing): 0.55%
  • Upcoming Dividend Date: Dec 21, 2023
  • Market Cap: $77.70 Billion
  • Forward P/E Ratio: 17.61

The Quebec-based Alimentation convenience store chain started with one store in Laval in 1980. Now, after about four decades later, the company owns about 14,200 stores in 26 countries and employs over 124,000 people around the globe.

It’s second only to 7-Eleven in the world. The company mostly operates through three prominent brands. It also owns and operates a sizeable network of fuel sites.

2. Emera Stock

Emera Stock
  • Ticker: EMA.TO
  • Sector: Utilities
  • Industry Niche: Electric power distribution  
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 4.46%
  • Dividend Payout Ratio: 114.04%
  • Dividend Yield (12-Month Trailing): 5.85%
  • Upcoming Dividend Date: Feb 15, 2024
  • Market Cap: $12.72 Billion
  • Forward P/E Ratio: 14.21

Fortis is usually the first in line as the best utility defensive stock in Canada, and Algonquin is another strong contender, but it’s Emera that sustained the least losses (collectively) in the last few economic crises.

It has a healthy utility business: 2.5 million customers (80% electricity, rest gas) in the US and Canada (over 95% regulated) and over $33 billion in assets.

The company has grown its payouts by about 6% a year in the last two decades, so passive income based on its dividends can easily help you outpace inflation.

The company is rapidly reducing its carbon footprint, so it’s future-proofing its earnings as well.

3. BCE Stock

  • Ticker: BCE.TO
  • Sector: Telecom
  • Industry Niche: Wireless Services (including the Internet)
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 5.78%
  • Dividend Payout Ratio: 109.41%
  • Dividend Yield (12-Month Trailing): 7.57%
  • Upcoming Dividend Date: Jan 15, 2024
  • Market Cap: $45.91 Billion
  • Forward P/E Ratio: 15.68

Telecom is one of the few Canadian sectors there are well-established oligopolies. BCE is typically the largest giant (in terms of market cap) with an incredible presence.

It’s also the most generous dividend stock in the sector, though it lags a bit in growth, especially to Telus. With full 5G penetration still years away, BCE has a lot of scopes to grow yet.

The company has an impressive client base as well. The bulk of its customers are in the wireless business (10.22 million), and the other 8.9 million are high-speed internet, TV, and wired telecom users.

It’s a leader in a safe sector with minimal chance of new players disrupting the market – making it a excellent defensive stock.

4. Canadian National Railway Stock

Canadian National Railway Stock
  • Ticker: CNR.TO
  • Sector: Industrials  
  • Industry Niche: Transportation (Railway)      
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 1.78%
  • Dividend Payout Ratio: 37.02%
  • Dividend Yield (12-Month Trailing): 1.83%
  • Upcoming Dividend Date: Mar 28, 2024
  • Market Cap: $109.26 Billion
  • Forward P/E Ratio: 18.83

The railway giant in the country is in the integrated transportation and logistic business. Trains are still one of the most economical ways to move heavy cargo.

CNR’s true strength comes from its railway network (over 20,000 miles long), which connects three North American coasts and serves as a crucial piece of the in-land logistics puzzle in the region.

The company is financially sound, with its business likely to remain in demand for decades.

5. Thomson Reuters Stock

Thomson Reuters Stock
  • Ticker: TRI.TO
  • Sector: Industrials  
  • Industry Niche: Professional services/Media      
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 1.56%
  • Dividend Payout Ratio: 147.83%
  • Dividend Yield (12-Month Trailing): 0.94%
  • Upcoming Dividend Date: Mar 08, 2024
  • Market Cap: $93.61 Billion
  • Forward P/E Ratio: 37.9

Thomson Reuters can trace its roots back all the way to 1851, where one of the two companies that combined to make Thomson Reuters (Reuters) was born.

It has deep roots in the newspaper business, though now it’s only a fraction of its current business model.

It has evolved to become the “answer” company, a fancy way of saying consultancy.

The company is a trusted provider of complex solutions to a variety of industries, though it makes most of its revenue out of legal, corporate, and tax and accounting consultancy.

It’s a decent growth stock and one of the oldest aristocrats in the country with a powerful capital appreciation potential.

6. Brookfield Asset Management Stock

Brookfield Renewable Partners Stock
  • Ticker: BAM.TO
  • Forward Dividend Yield: 3.72%
  • Dividend Payout Ratio: N/A
  • Dividend Yield (12-Month Trailing): 2.34%
  • Upcoming Dividend Date: Mar 28, 2024
  • Market Cap: $20.74 Billion

Brookfield Asset Management is a giant. It’s one of the largest companies in the country by market capitalization and has an impressively global reach.

With over $690 billion in assets under management and operations in over 30 countries, Brookfield engages in various businesses, primarily renewable power & transition, infrastructure, and private equity.

It has a lot of fingers in a lot of pies, which both exposes it and solidifies its status as a defensive stock.

The diversified operations and global presence allow it to weather economic headwinds better than most isolated businesses, and it has proven that on multiple occasions.

7. Canadian Apartment Properties REIT Stock

Canadian Apartment Properties REIT Stock
  • Ticker: CAR-UN.TO
  • Sector: Real Estate   
  • Industry Niche: Residential REIT      
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 3.07%
  • Dividend Payout Ratio: 18.55%
  • Dividend Yield (12-Month Trailing): 2.92%
  • Upcoming Dividend Date: Feb 15, 2024
  • Market Cap: $8.18 Billion
  • Forward P/E Ratio: 19.04

As the largest REIT in the country (by market cap) and a massive portfolio of over 67,500 residential suites (that it owns or manages), Canadian Apartment Properties lands a spot on this list by providing the most basic of all human needs shelter.

No matter what the economy is like, people do whatever they can to have a roof over their head, and that’s where an apartment-focused REIT win.

The company usually maintains a healthy occupancy rate, which cuts down overhead costs to a minimum and ensures healthy cash flow, which results in secure dividends.

But the REIT is a better pick for its capital appreciation potential than its dividends.

8. Enbridge Stock

  • Ticker: ENB.TO
  • Sector: Energy    
  • Industry Niche: Energy Transportation/Pipelines        
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 6.21%
  • Dividend Payout Ratio: 140.66%
  • Dividend Yield (12-Month Trailing): 7.56%
  • Upcoming Dividend Date: Mar 01, 2024
  • Market Cap: $98.56 Billion
  • Forward P/E Ratio: 15.3

Energy is another sector usually not highlighted in the defensive stock lists, but if we had to choose one stock from the energy sector, it would be Enbridge.

Not only does it not fall as hard as others when the energy sector is in trouble (thanks to its business model: Pipelines), it has also maintained a reliable and consistent return potential by growing its payouts for over 25 years.

It’s one of the most generous dividend aristocrats currently trading on the TSX and the largest energy company.

And since the post-pandemic market has taught us the need for fossil-fuel energy is not drying up any time soon, Enbridge deals in products that are almost always in demand: Oil and gas.

9. Toronto Dominion Bank Stock

TD Logo
  • Ticker: TD.TO
  • Sector: Financials    
  • Industry Niche: Banking         
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 4.27%
  • Dividend Payout Ratio: 41.74%
  • Dividend Yield (12-Month Trailing): 4.81%
  • Upcoming Dividend Date: Jan 31, 2024
  • Market Cap: $140.75 Billion
  • Forward P/E Ratio: 9.3

The Canadian banking sector is one of the most conservative and stable in the world, and as the second-largest Canadian Bank and the top retail bank in Canada, TD is as safe a financial stock can get.

Like most other Canadian banks, TD survived the great recession without major losses. It has also proven its mettle and stability during several other financial downturns that rocked the TSX as a whole.

The bank has a lot of exposure to the US market and an impressive international presence, which promises better growth avenues than the saturated home market.

It offers stable dividends at a modestly high yield (usually) and grows its payouts by generous margins each year. The growth potential is good and sustainable.

10. Waste Connections Stock

Waste Connections Stock
  • Ticker: WCN.TO
  • Sector: Industrials      
  • Industry Niche: Waste Collection/Solid Waste Management          
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 0.66%
  • Dividend Payout Ratio: 33.90%
  • Dividend Yield (12-Month Trailing): 0.49%
  • Upcoming Dividend Date: Nov 28, 2023
  • Market Cap: $54.75 Billion
  • Forward P/E Ratio: 32.82

While it’s technically an industrial stock, the service it provides makes it more similar to unavoidable utilities than other industrial businesses.

The solid waste management business is almost evergreen, and the recycling end of the business makes it a potent ESG holding as well.

The stock’s safety also comes from its extensive service network: 44 US states and 6 Canadian provinces.

It’s one of the largest waste management companies in the world and one of the top three in North America. It’s also a stable and well-established dividend aristocrat.

However, more investors are attracted by its powerful growth potential, which is uncharacteristically high for a stock that checks so many defensive stock boxes.

11. Metro Stock

metro Stock logo
  • Ticker: MRU.TO
  • Sector: Consumer Staples       
  • Industry Niche: Groceries and Pharmacies           
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 1.56%
  • Dividend Payout Ratio: 22.21%
  • Dividend Yield (12-Month Trailing): 1.79%
  • Upcoming Dividend Date: Mar 12, 2024
  • Market Cap: $15.54 Billion
  • Forward P/E Ratio: 14.44

Any comprehensive list of the best defensive stocks in Canada would be incomplete without Metro.

Even though it has a much smaller network than Alimentation Couche-Tard, its grocery and pharmacy focus makes it even more defensive and resilient in nature.

The company has a portfolio of 950 grocery stores and 650 pharmacies – two things people can’t stop spending money on, no matter how tight their financial situation is.

Metro operates through various banners, though most of its network is local. It’s ingrained in the fabric of most Canadian communities and is a household name.

It offers a decent combination of growth and dividends, leaning more towards the former.

12. OpenText Stock

Open Text Stock
  • Ticker: OTEX.TO
  • Sector: Tech        
  • Industry Niche: Enterprise Information Management Software           
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 2.27%
  • Dividend Payout Ratio: 49.34%
  • Upcoming Dividend Date: Mar 20, 2024
  • Market Cap: $14.19 Billion
  • Forward P/E Ratio: 11.86

OpenText is a dividend aristocrat, which is a rarity in the tech sector, but that’s not the only endorsement of its “stability.” The numbers are on the side of this reliable growth stock.

It has performed incredibly well in most of the economic crises of the past decade or so, and even though its growth potential is relatively modest compared to the other tech stock on this list, it’s just as (if not more) reliable.

The company is relatively evolving to take advantage of overlapping technologies.

It has already entirely switched to the cloud, which shows the future-facing thinking of its stakeholders/decision-makers.  

Contrarian Stocks

These two are not typical picks for defensive stocks, but rather they can provide some diversification from the overall market when it is fluctuating.

13. Constellation Software Stock

Constellation Software logo
  • Ticker: CSU.TO
  • Sector: Tech
  • Industry Niche: Software solutions   
  • Dividend Aristocrat: No
  • Forward Dividend Yield: 0.24%
  • Dividend Payout Ratio: 20.31%
  • Dividend Yield (12-Month Trailing): 0.11%
  • Upcoming Dividend Date: Jan 11, 2024
  • Market Cap: $76.35 Billion
  • Forward P/E Ratio: 34.21

While tech is one of the least defensive sectors out there, Constellation’s powerful track record and its monstrous growth potential warrant a place on this list.

In the last two decades, the company never took more than two years to recover from a crash/correction phase, and in the times of most crises, it regained lost valuation within the year.

It has been the most consistent growth stock of the last two decades and offers a millionaire-maker growth pace with the stability of some of the most stable defensive stocks.

The primary business of the company is building and managing software, which it engages in through its subsidiaries (thoroughly vetted and acquired).

It has an impressive global reach (clients in 100 countries).

14. Franco-Nevada Stock

  • Ticker: FNV.TO
  • Sector: Materials
  • Industry Niche: Gold Royalties    
  • Dividend Aristocrat: Yes
  • Forward Dividend Yield: 1.00%
  • Dividend Payout Ratio: 31.44%
  • Dividend Yield (12-Month Trailing): 0.91%
  • Upcoming Dividend Date: Mar 28, 2024
  • Market Cap: $27.79 Billion
  • Forward P/E Ratio: 31.86

Even though gold stocks are mostly contrarian, Franco-Nevada is a special case.

It’s a consistent grower (regardless of the market conditions), mostly because it doesn’t directly engage in mining and development business but has royalties in over 300 mining operations, the bulk of which are in Latin America.

Franco-Nevada is not your typical defensive stock, but it has shown more resilience than most utility and consumer staple stocks during the past few financial/economic harsh periods.

Which Stock Sectors Are Defensive?

There is general consensus on three defensive sectors: Utility, consumer staples, and healthcare. But there can be great variation within the sector.

For example, in the Canadian healthcare sector, the marijuana industry dominates, which relies upon discretionary spending (not a defensive asset trait).

On the other hand, segments of the industrial sector, like transportation, may perform well due to evergreen demand.

Gold stocks (from the material sector) often outperform the market during the economic crisis, but they are more contrarian than defensive.

But you may be surprised by what other kinds of stocks (from sectors you might not consider defensive) are widely considered defensive. An amazing example would be McDonald’s.

Is McDonald’s A Defensive Stock?

Yes. As the largest fast-food restaurant chain in the world, McDonald’s ticks many of the boxes of a defensive stock, and its performance has endorsed the fact that it’s a defensive stock, time and time again.

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Best Defensive Stocks In Canada

The wrong defensive stock, which, even if it can survive market downturns better than most, might just weigh your portfolio down.

However, if you follow the approach I’ve used to make this list, i.e., choose defensive stocks that also offer excellent return potential, you may have a small but powerful asset pool at your disposal that might actually help you reach your best-case scenario investment goals.

If you want to add another layer of safety to your portfolio, all-in-one ETFs might be an investment worth exploring.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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