Volatility is returning to the markets, and investors hoping to build a retirement fund are wondering which stocks might be reliable long-term picks right now.
Let’s take a look at two companies that deserve to be on your radar for a self-directed portfolio today.
Fortis (TSX:FTS)(NYSE:FTS) might not be the most exciting business in the TSX Index, but it is tough to beat the quality of the company’s dividend growth. When it comes to planning your retirement, reliability is much more important than entertainment.
Fortis owns natural gas distribution, power generation, and electric transmission assets in Canada, the United States, and the Caribbean. The majority of the revenue now comes from the American businesses in regulated sectors, providing steady and predictable cash flow. When the U.S. dollar rises against the loonie, the company’s profits get an additional boost.
Fortis grows by making acquisitions as well as investing in organic projects. The current $17.3 billion capital program is expected to boost the rate base significantly in the next four years, and Fortis anticipates cash flow will grow enough to support dividend increases of 6% per year.
The company has raised the payout for 45 straight years, so the guidance should be solid. Investors who buy the stock today can pick up a dividend yield of 3.5%.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) just made another large acquisition in the Canadian energy sector. The company is paying $3.8 billion to buy the Canadian oil sands and conventional oil assets owned by Devon Energy. The deal makes strategic sense in that the assets are close to existing CNRL operations. The purchase also moves CNRL closer to becoming the top oil sands player.
CNRL has a strong balance sheet and its diverse resource base, which includes oil sands, conventional oil, natural gas, and gas liquids, as well as offshore production, is widely viewed as the best energy portfolio in the country. CNRL generates strong cash flow and pays investors well while reducing debt and buying back shares.
The company raised the dividend by 12.5% for 2019, and steady annual increases should continue. The stock has pulled back to the point where it appears oversold. At the time of writing, investors can pick up CNRL for $36 per share compared to $49 last summer, so there is some decent upside potential once oil prices rebound. The dividend provides a 4.2% yield.
The bottom line
Fortis is a conservative pick that tends to hold up well when the broader market hits a rough patch. CNRL is a contrarian play on a top-quality company that has a growing dividend and offers a shot at some serious upside in the coming years. If you only buy one, I would probably make CNRL the first choice today.
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 Andrew Walker has no position in any stock mentioned.