Market Volatility: 3 Stable Stocks to Anchor Your TFSA

Volatile market, stock volatility

Despite the global headwinds, the United States’s GDP (gross domestic product) rose by 4.9% in the third quarter, higher than analysts’ expectation of 4.7%. Strong consumer spending, increased residential and government spending, and higher exports drove the company’s GDP. However, these solid GDP numbers have failed to improve investors’ sentiments.

The fear of the Federal Reserve continuing with conservative monetary policies amid sticky inflation has made investors nervous, leading to volatility in the equity markets. Amid the uncertain outlook, investors should be careful while investing through their TFSA (Tax-Free Savings Account), as a decline in stock price could also lower its cumulative contribution room. Meanwhile, here are three stable TSX stocks that investors can add to their TFSA, given their solid underlying businesses and healthy growth prospects.

Dollarama

Dollarama (TSX:DOL) is one of the excellent defensive stocks to have in your portfolio. It has grown its revenue and net income at an annualized rate of 11% and 17%, respectively, over the previous 12 years. Its wide range of product offerings at attractive price points and extensive presence across Canada have driven its financials.

Meanwhile, I expect the uptrend in the company’s financials to continue. It focuses on expanding its store network by opening around 60-70 stores yearly to increase its store count to 2,000 by 2031. The discount retailer is strengthening its direct sourcing capabilities and optimizing its logistics to offer its products at a greater value to its customers. Given its solid underlying business and healthy growth prospects, I believe Dollarama would be an excellent addition to your portfolio.

Fortis

Second on my list is Fortis (TSX:FTS), which operates 10 regulated utility assets serving approximately 3.4 million customers. Supported by its solid regulated utility business, the company has delivered an average total shareholder return of 10% for the previous 10 years. Despite the rising interest rates, the company has beaten the broader equity markets this year by returning 5.6%.

Further, the electric and natural gas utility company has planned to make a capital investment of $25 billion from 2024 to 2028. Meanwhile, the company expects to meet 55% of those investments from the cash generated from its operations, 11% from equity, and 34% from debt. These investments could expand its rate base at an annualized rate of 6.3%. Amid these growth initiatives, Fortis’s management expects to increase its dividend at an annualized rate of 4-6% through 2028. The company’s forward yield currently stands at 4.25% and trades at an attractive NTM (next 12-month) price-to-earnings multiple of 17.5, making it an attractive buy.

Waste Connections

Another stable TSX stock I am bullish on is Waste Connections (TSX:WCN), which offers non-hazardous solid waste management services across North America. It operates primarily in secondary or exclusive markets. So, the company faces less competition, thus allowing it to enjoy higher margins. The company has been expanding its footprint through strategic acquisitions, thus supporting its financial growth. 

Meanwhile, the company reported its third-quarter performance on Wednesday, with its revenue and adjusted EPS (earnings per share) growing by 9.8% and 6.4%. Amid its solid operational execution, the company’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin expanded by 120 basis points compared to the previous year’s quarter.

Despite its strong performance, the waste management company lost 6.6% of its stock value on Thursday. In its earnings statement, the company’s management announced that it faces certain site-specific issues at its California and Texas landfills. The management projects that these issues could lower its fourth-quarter revenue, adjusted EBITDA, and adjusted free cash flows by $20 million, making investors nervous. Despite these short-term fluctuations, I am bullish on Waste Connections due to its solid underlying business and expansion initiatives.

The post Market Volatility: 3 Stable Stocks to Anchor Your TFSA appeared first on The Motley Fool Canada.

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Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.