There is no shortage of cheap stocks out there, but some are going to get a lot cheaper.

That’s why investors have to be careful right now and should focus on quality names that enjoy leadership positions in stable sectors and demonstrate long histories of dividend growth.

This is why I think dividend investors with a bit of cash on the sidelines should consider BCE Inc. (TSX:BCE)(NYSE:BCE) and Royal Bank of Canada (TSX:RY)(NYSE:RY) right now.

BCE Inc.

The Canadian telecom market doesn’t have a lot of competitors. That might not be great for consumers who would like to see lower prices, but it is a wonderful situation for investors.

BCE has built itself a formidable competitive moat. The company is not just a premier provider of mobile, TV, and broadband Internet services; it also owns a broad range of assets all along the media and communications value chain.

In fact, any time a person in this country sends a text, checks e-mail, downloads a movie, listens to the radio, buys a new phone, or catches a game on TV, there is a strong possibility that a bit of cash is headed into the pockets of BCE’s shareholders.

That’s a great business and BCE continues to invest to make sure it will maintain its dominant position.

Over the next five years, the company plans to spend more than $20 billion to expand its broadband fibre and wireless network to ensure its customers can access all the data they need as fast as they want at any time.

Investors might be concerned that this will eat up too much free cash flow, but that’s the great thing about BCE—it’s a cash machine.

For the second quarter, BCE reported year-over-year free cash flow growth of 8% and adjusted earnings per share rose by 5%.

The company pays an annualized dividend of $2.60 per share that yields 4.8%. Investors should see the dividend continue to expand with free cash flow in the coming years.

Royal Bank

The Canadian banking industry is famous for nailing its customers with ever-increasing fees. This is frustrating for banking clients, and people will always complain, but they can’t really avoid dealing with the banks, so they might as well get in on the action and buy them.

Royal Bank is as good a choice as any and offers investors a balanced exposure to revenue streams from Canadian, U.S., and international operations.

This is important right now because the Canadian economy is going through a rough patch, and the ugliness coming out of the energy sector might only be in the early innings.

Despite some expected upticks in loss provisions, Royal Bank is well positioned to ride out the economic storm, just as it has every other time the market floundered over the past 150 years.

The pullback in Royal Bank’s shares should be viewed as a good long-term buying opportunity. The company now trades at an attractive 10.3 times forward earnings and just 1.9 times book value. The stock could certainly fall further, but this looks like a good entry point over the long haul.

Royal Bank pays a quarterly dividend of $0.79 per share that yields about 4.4%. Management just increased the payout, so investors should take that as a signal that they are comfortable with both the risk profile of the loan portfolio and the outlook for earnings.

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Fool contributor Andrew Walker has no position in any stocks mentioned.