Consider Hydro One (TSX:H) and TC Energy (TSX:TRP) stocks, which sport dividend yields of 2.96% and 6.19%, respectively, at the time of writing.

Investors should consider how their portfolios will perform and whether they are prepared for a repeat of 2022 because a Canadian recession is soon to arrive. In fact, relief might arrive in 2023, but investors should proceed cautiously and temper their hopes for a recovery.

We’ve all been trained to invest during declines and anticipate V-shaped recoveries. I believe value investors who choose their way into undervalued securities will have what it takes to beat the TSX Index and score a positive return in what could be a down year, even though it is impossible to predict how quickly the market will recover from the bear market of 2022.

Recession looms: Defensive investing in mind

Everyone’s focus right now is on defending. Top utilities and dividend payers’ valuations have risen as a result. For most of 2022, the growth-to-value rotation has been in full force. This does not imply that value should be abandoned in favor of growth. Investors acting contrary to the norm could consider boosting beaten-up technology. However, I believe that a small handful of TSX equities still trading at fair multiples offer more value (and safety).

This article will examine two of the most consistent dividend payers that seem to be trading at fair multiples. Regardless of what Mr. Market throws at us next, these stocks could be essential to performing well over the long term!

Hydro One

One of the stocks on the market right now that is most comparable to bonds is Hydro One. The business enjoys a monopoly in the Ontario transmission market. Compared to the average stock, Hydro One’s cash flows are unquestionably much less volatile. A bit of a snoozer is likely to characterize any given quarter. But in this kind of unstable market, that’s a wonderful thing!

In two of the previous four quarters, Hydro One has reported results within a cent of the forecast. In fact, the absence of shock makes Hydro One a dividend provider that allows investors to sleep soundly. The stock has a 0.26 beta, which indicates that shares are less likely to take into account factors that move the broader markets, as a result of fewer earnings choppiness.

At 22 times trailing price to earnings (P/E), H stock is a fairly valued dividend stock to ride out hard times.

TC Energy

TC Energy stock looks tempting at these levels for investors seeking more reward (for more risk). The stock has a low beta of 0.84, meaning TRP stock is less volatile than the market but more volatile than H stock. The 6.19% yield is the star of the show. And it’s a secure payout despite sporting a payout ratio on the higher end.

With energy stocks calling the shots, I view TC, a top-tier midstream company, as a defensive dividend payer with greater potential rewards.