Designing a Defensive Stock Portfolio with Utilities, Oil & Gas, and Blue-Chip Stocks

• Create a defensive stock portfolio with a focus on utilities, oil & gas, and blue-chip stocks.
• Selected stocks include ENB.TO, CJ.TO, and BCE.TO, emphasizing high dividends and strong fundamentals.
• This approach balances income generation with reduced volatility, protecting overall capital.

Designing a Defensive Stock Portfolio: Utilities, Oil & Gas, and Blue-Chip Stocks

Creating a well-rounded stock portfolio is essential for investors looking to achieve steady income and long-term growth. This portfolio design focuses on defensive sectors such as utilities and oil & gas, which tend to offer stability during economic downturns. In addition, incorporating blue-chip stocks with relatively large market capitalizations helps protect overall portfolio value while providing high dividend yields.

Portfolio Strategy

When building this portfolio, I prioritized the following criteria:

• High Dividend Yields: Select stocks that offer attractive dividend rates, ensuring a steady income stream.
• Blue-Chip Stocks: Focus on established companies with strong financials, ensuring reliability and resilience during market fluctuations.
• Market Capitalization: Opt for larger companies to reduce volatility and maintain overall portfolio stability.

Stock Picks

Here are my eight stock selections for this defensive portfolio:

1. ENB.TO (Enbridge)
   A leading energy infrastructure company, Enbridge provides a consistent dividend and is a key player in the utilities sector.
2. CJ.TO (Cardinal Energy)
   This oil and gas producer focuses on sustainability and operational efficiency, contributing to its strong dividend performance.
3. PEY.TO (Peyto Exploration)
   Known for its low-cost structure and strong cash flow, Peyto Exploration is well-positioned in the oil & gas sector.
4. DBM.TO (Doman Building Materials)
   A solid choice in the building materials sector, Doman offers a dependable dividend and strong fundamentals.
5. BPF.UN.TO (Boston Pizza Royalties)
   This royalty income trust provides stability and attractive yields, capitalizing on the well-known Boston Pizza franchise.
6. KPT.TO (KP Tissue Inc.)
   KP Tissue focuses on manufacturing and selling tissue products, offering a reliable dividend backed by strong market positioning.
7. BTO.TO (B2Gold Corp)
   A gold mining company that focuses on producing high-quality gold, B2Gold has a solid dividend track record.
8. BCE.TO (BCE Inc.)
   As a leading telecommunications provider, BCE offers reliable dividend payments and benefits from stable demand in its sector.

Portfolio Comparison with XUT.TO

When comparing this defensive stock portfolio to the iShares S&P/TSX Capped Utilities Index ETF (XUT.TO), which offers a dividend yield of 5.41% as of writing, the advantages of the selected stocks become evident. Over the last five years, this portfolio has not only preserved capital well but also achieved some upside. In contrast, XUT did not experience significant capital appreciation during the same period.

With an average dividend rate of 8.02% for the portfolio, it’s encouraging to witness both capital appreciation and higher dividends compared to the ETF. Additionally, Canadian citizens can benefit from favorable tax treatment on dividend income received from Canadian companies, further enhancing the attractiveness of this portfolio.

Conclusion

By focusing on utilities, oil & gas, and defensive blue-chip stocks, this portfolio aims to provide investors with steady income and reduced volatility. The selected stocks not only deliver attractive dividends but also bring strong fundamentals, ensuring protection against market fluctuations. This balanced approach allows investors to enjoy the benefits of income generation while safeguarding their capital, making it an appealing strategy in uncertain economic times.