The Canadian economy may not be in as good shape as it seems, as some experts believe that a recession may already be beginning to take place. Meanwhile, investors are increasingly pivoting toward defensive assets to safeguard their capital.
While economic downturns typically trigger market volatility, the energy sector, specifically Canadian oil and gas, can be a relatively safe place to invest in. Companies in the sector generate fairly strong earnings, have gotten bigger and more efficient over the years, and they also pay dividends.
A good example of their stability is what happened in 2022, when the market crashed and the S&P/TSX Composite Index fell by 9%. The energy sector performed tremendously well. Leading this charge was Cenovus Energy (TSX:CVE)(NYSE:CVE). In a year full of market instability, Cenovus saw its share price surge by nearly 70%. As a major producer with enhanced scale and operational efficiency, it remains a powerhouse for growth. With a dividend yield of approximately 3%, it offers a balanced mix of income and capital protection for those bracing for a slowdown.
Equally compelling is Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ), the nation’s largest crude producer. The company operates on a long-life, low-decline asset model, ensuring consistent production regardless of the economic climate. In 2022, the stock gained an impressive 41%. For income-focused investors, Canadian Natural Resources is particularly attractive due to its robust 4.5% dividend yield.
By prioritizing companies like Cenovus and Canadian Natural Resources, investors can leverage high-margin production and consistent payouts to navigate a recession. These stocks can make good investments to hang on to, even if you're worried about the economy.
