Each one of these defensive stocks is uniquely positioned to benefit from the demand for economically critical infrastructure
The following three Canadian companies, all defensive stocks, own and operate infrastructure that is crucial to the economy, making them a core holding for every portfolio.
Each company is uniquely positioned to benefit from the demand for economically critical infrastructure. This helps to shield them from downturns in the economic cycle, making them solid defensive options in a volatile market. It also helps to guarantee their earnings and allows them to reward investors with steadily rising and sustainable dividends.
First is one of the world’s largest publicly listed infrastructure companies, Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP).
It owns and operates a globally diversified portfolio of critical infrastructure across developed and emerging markets, including electricity and natural gas transmission, roads, rail, ports, and telecommunications towers. This endows its earnings with the stability associated with developed markets and the additional growth that emerging markets offer.
More importantly, a significant proportion of those assets operate in oligopolistic markets with revenues contractually locked in over long periods. This not only allows Brookfield Infrastructure to be a price maker, but gives its earnings considerable certainty.
As a result, it has been able to boost earnings through acquisitions. The latest deal is the US$5.2 billion purchase of a Brazilian natural gas transmission utility from deeply troubled energy company Petróleo Brasileiro S.A.
Along with its focus on growth through accretive acquisitions, these characteristics have allowed it to hike its dividend for the last eight years straight. It now rewards investors with a tasty 4.6% yield.
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