Buy Canadian Tire and 1 Other Defensive Dividend Stock for a Solid Tag Team

Canadian Tire Corporation Limited (TSX:CTC.A) is about to get handed a freebie. Here’s how pairing it with a utilities giant can put cash in your pocket.

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The Motley Fool

Are you starting your first investment portfolio, or maybe looking to pad your current basket with some solid dividend performers? We have a solid defensive pairing for you, whether the markets have got you spooked or if you want to stabilize a risky portfolio. It’s time to crack out the maple syrup and rustle up a poutine, because we’re going full Canadian with this one.

Canadian Tire is already a national powerhouse, but it’s about to get stronger

Smart investors already know about this steady-handed retail superstar. But there is even better news on the horizon that even the most vocal fans may not be talking about.

Canadian Tire Corporation Limited (TSX:CTC.A) is a great buy, as anyone will tell you, but it’s about to get even better. Why? Well, besides the coming sales boost from the return of the good weather (after what felt like one of the longest winters ever), Canadian Tire just got handed a freebie.

Other investors might not see the significance of Toys “R” Us going down the toilet, but its demise is good news for holders of Canadian Tire stock.

Still not following us? The point is, once all those high-street toy shops go the way of the dodo, Canadian Tire has the opportunity to really capitalize on the phenomenon known in retail circles as “pester power.” Canadian Tire does some solid lines in kids’ toys — as well as outdoor play items — and the chance to mop up the fallout from Toys “R” Us is substantial.

Why Pairing Canadian Tire with Algonquin Power makes a lot of sense

Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) is one of the top Canadian utilities companies. With a stable base of operations spanning already diversified assets, this a solid defensive dividend stock on its own. But pair it with the might of Canadian Tire, and you have a tag-team pairing that will fight for you all the way.

Why Algonquin Power in particular, though? Let’s look at some core facts to see why this utilities giant is one to back.

Its management style is impressive, progressive, and somewhat aggressive, and that is exactly what you want in a power stock. With new and future acquisitions adding to its already diversified assets base, and a growing year-over-year income, this is a growth stock worth hanging on to.

When you pair two defensive stocks from very different sectors, you are not only strengthening the back end of your investment portfolio, but you are also adding income that you can literally bank on.

The bottom line

If you want to add two defensive dividend stocks to the back end of your portfolio in an unsettled equities market, these two are a strong pairing. As a first investment, twinning Canadian Tire with Algonquin Power is also a strong opening move and a great basis for future investment. What you’ll be getting with this tag team is a fairly well-diversified foundation that spans the energy and home improvement sectors. Add a couple of safe-ish short-term money spinners from slightly more volatile markets, and you’ll have yourself a full-bodied portfolio to be envied.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in the companies mentioned.

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