Canadian Blue Chips: The Perfect Hedge Against Surging Interest Rates?

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The Canadian market has seen considerable recovery from the tumultuous hit of the pandemic. In the first half of 2023, popular companies that most investors look forward to have given results beating analysts’ estimates. However, there are still market risks, such as rising interest rates, which can turn any sort of bullish momentum on its head. 

In such circumstances, it is wise to invest in stocks that have a strong hold in the market as well as excellent valuations and consistent and quality performance track records. Here are three such blue-chip stocks to invest in October 2023. 

Royal Bank of Canada 

Royal Bank of Canada (TSX:RY), or RBC, Canada’s largest bank, offers a promising investment opportunity. With a current dividend yield of 4.4% and a strong dividend history dating back to 1870, it has plenty of long-term upside potential left. 

The company has maintained a consistent dividend-payout ratio of approximately 46.6%, indicating financial stability and room for further expansion. In the quarter ending July 31, 2023, RBC reported net income of $3.9 billion, a remarkable 8% increase over the previous year. These factors, combined with a reasonable valuation, make RBC an attractive choice for investors.


Telus (TSX:T), a leading telecommunications company, has seen its share price drop 36% due to volatile interest rates and the potential impact of a recession. Despite a high dividend yield of 6.6%, its price-to-earnings ratio is 26.9 times, making this company one that offers relatively strong value when this metric is compared to its historical average. 

However, its exposure to emerging 5G technology could be a driver of future growth. Currently trading below $25 per share, Telus generates significant revenue from basic mobile and Internet services. Telus expects 9.5% revenue growth and 7% earnings before interest, taxes, depreciation, and amortization growth. Investors can benefit from a 6.5% dividend yield at the current price.

Canadian National Railway 

Canadian National Railway (TSX:CNR), North America’s leading specialty rail transportation company, plays a vital role in facilitating trade between Canada and the United States. 

Shareholders recently received a quarterly dividend of $0.5996 per share for an annual dividend of $2.40 per share and a yield of 2.26%. This represents an increase from the company’s previous dividend payout of $0.58 per share. 

Canadian National Railway boasts a dividend-payout ratio of 39.73%, signifying its commitment to distributing profits to shareholders. Analyst consensus points to a continued payout of around 38% of earnings over the next three years and a steady return on equity of 30%.

Bottom line 

As many investors are aware, these blue-chip companies have established track records of quality dividend payments and growth. Hence, these stocks are safe bets in this market condition with rising interest rates. 

The post Canadian Blue Chips: The Perfect Hedge Against Surging Interest Rates? appeared first on The Motley Fool Canada.

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* Returns as of 10/10/23

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Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and TELUS. The Motley Fool has a disclosure policy.