Investors interested in making long-term financial gains realize the importance of making their idle money do the work for them. The smartest investors of all tie their money up in assets, providing them with growing returns over time. High-yield dividend growth stocks that you can buy and hold for a long time are the way to go.
The importance of high-yield stocks increases twofold, especially in times of economic uncertainties. It’s no secret that the global markets are very volatile right now.
The U.S. and China trade war doesn’t appear to be slowing down anytime soon, while rising problems in the Middle East, other geopolitical tensions, and manufacturing slowdowns are creating panic worldwide.
Amid all of these issues, there’s also an imminent risk of a recession looming overhead. A market environment like this sees investors look toward safe and reliable options to help them ride the wave.
Many investors therefore choose to cash out their stocks and invest them in alternative assets to protect them. Guaranteed income certificates and bonds are traditional options.
There’s a better way to go about it: reliable dividend growth stocks.
Viable investment income option
Dividend growth investing is an alternative, which proves to be more feasible than the prior two options. In many cases, dividend yields from the right Canadian companies can provide investors more returns than any GICs or rates on bonds. Utility stocks seem to weather the storms pretty well.
In what seems like a challenging time for the TSX, Canadian Utilities (TSX:CU) is presenting a picture of calmness and composure. Dividend growth stocks are typically less prone to fluctuations in stock markets. Conservative asset classes like utilities, consumer defensive stocks, and pipeline company stocks are usually the most stable through a recession.
Canada’s first potential dividend king stock
Canada’s dividend growth stocks are not as old as the likes of U.S. stocks. There are more than 100 companies listed, which count as Dividend Aristocrats in Canada (with dividend growth streaks of five or more years).
There are no companies with have dividend growth streaks of 50. Companies that achieve a dividend growth streak of 50 years are known as Dividend Kings.
While Canada does not currently have a Dividend King Stock, Canadian Utilities sits close to that critical number. A dividend growth streak of 48 years at the time of writing makes CU a desirable option to consider.
The utility provider raised its dividend payouts by 7.5% in February 2019. The average 9% annual dividend growth over the past decade makes CU’s 4.36% dividend yield an excellent investment option for conservative investors.
You can expect these kinds of numbers with the annual compound growth rate to double your investments in the stock over roughly 17 years.
While I predict how the overall market will perform as the recession hits, I do know that some stocks present safer options for investors. The demand for utilities never goes down, no matter how bad the economic situation gets, making utilities one of the most stable sectors through an economic depression.
Canada’s first potential Dividend King is a stable and diversified utility company. CU is capable of sustaining high dividend payouts, despite economic conditions, and the $38.75 per share at the time of writing makes the company’s stock a potentially brilliant buy-and-hold option.
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 Adam Othman has no position in any of the stocks mentioned.