Stock markets have been on the rise for about eight years, which means we are due for a major correction.
Historically, we see a meltdown about once every decade. The last was the Great Recession. Before that we had the Dot-Com crash, and for those who have been investing for a long time, Black Monday in October 1987 was the scariest. On that day, the Dow lost more than 22% of its value.
When or why the next sell-off will occur is unknown, but many analysts believe it is coming, and soon.
Which stocks should you own?
Sitting on 100% cash, hoping to catch the bottom of a crash, is a poor investing strategy. The nadir of a pullback is only ever realized after the market has recovered, so it’s simply better to take a long-term approach and focus investments on top-quality companies that pay reliable dividends and are able to ride out some turbulence.
When these stocks drop, we can simply take advantage of the discount to add more shares.
Let’s take a look at Enbridge Inc. (TSX:ENB)(NYSE:ENB), Canadian National Railway Company (TSX:CNR)(NYSE:CNI), BCE Inc. (TSX:BCE)(NYSE:BCE), Fortis Inc. (TSX:FTS)(NYSE:FTS), and Suncor Energy Inc. (TSX:SU)(NYSE:SU) to see why they might be attractive picks.
Enbridge recently closed its $37 billion acquisition of Spectra Energy in a move that creates North America’s largest energy infrastructure business.
The company now has $27 billion in short-term projects on the go and $48 billion in additional developments under consideration. As these assets are completed and go into service, Enbridge expects to raise the dividend by at least 10% per year through 2024.
CN is the only rail company in North America that can provide its customers with access to three coasts.
The business generates significant free cash flow, and management does a good job of sharing the profits with investors. In fact, the compound average dividend growth rate over the past 20 years is better than 16%.
BCE just closed its acquisition of Manitoba Telecom Services. The deal makes BCE the top player in the Manitoba market and positions the company well for a big push in the western provinces.
Consumers might not like the power BCE has to arbitrarily hike prices, but investors are all smiles. The stock tends to hold up well when the broader market slips, and the dividend now yields an attractive 4.9%.
Fortis owns natural gas distribution, power generation, and electricity transmission businesses in Canada, the United States, and the Caribbean.
The company gets more than 90% of its revenue from regulated assets, so cash flow should be predictable and reliable.
Fortis plans to raise the dividend by at least 6% per year through 2021. The payout has increased every year for more than four decades, so investors should feel comfortable with the guidance.
Suncor has proven its ability to weather tough times. The stock has held up very well through the oil rout, and any further weakness in the market would simply provide the powerhouse with more opportunities to add resources at discounted prices.
Suncor recently raised its dividend by 10%. The current payout provides a yield of 3.2%.
The bottom line
Holding top dividend-growth companies has proven to be a successful strategy over time. Market dips will come and go, but savvy investors with a long-term strategy can use the sell-offs as opportunities to add to their positions.
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Fool contributor Andrew Walker has no position in any stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway and Enbridge. Canadian National Railway and Enbridge are recommendations of Stock Advisor Canada.