Starting a new income stock portfolio or restructuring one to strengthen it for a downturn means picking the right companies. While there are many options for defensive dividend stocks on the TSX, some are definitely better than others.
Below we’ll run through some of the defining qualities of the best stocks on the TSX for long positions focused on safe, steady wealth creation.
Fortis
There are at least four great reasons to hold shares in Fortis (TSX: FTS)(NYSE: FTS). Aside from the fact that utilities are strongly defensive, Fortis commands the space with a sturdy economic moat, has increased its dividend for 45 consecutive years, and is diversified across the domestic market as well as in the Caribbean and the U.S. In total, its business is spread across 10 operations, almost entirely regulated.
This means that its 3.6% dividend yield is not only safe and secure, but also growing with a 6% target over the next five years. This combination of growth and reliability is what consistently gets Fortis onto the list of top TSX stocks.
For a strongly defensive play for assured income, even through an economic downturn, Fortis is popular option: Its stock is up 15.8% over the last 12 months.
BCE
If you’re going for big companies in dominant positions but still want a sizeable dividend, try BCE (TSX: BCE)(NYSE: BCE) on for size. Another wide-moat pick that deserves to be in the same tier as the likes of Fortis, BCE rewards investors with a dividend yield of 5%.
Buying for a reassuring track record? While BCE doesn’t come near to that 45-year run of hikes, its 11 consecutive years of dividend raises make it a buy.
With yearly turnover in the $23 billion bracket, BCE is nicely diversified across the Canadian telecoms and media sectors. While pundits often point out its massive fiber network of almost quarter of a million kilometres long, its streaming offerings under Crave also put it toe-to-toe with other media platforms. Investors trying to figure out the split: 87% is from broadband and wireless with the rest from media.
Methanex
Although it’s the lowest yield on this list, Methanex’s (TSX: MX)(NASDAQ: MEOH) 3.5% yielding dividend makes the cut. The methanol producer has hitched its dividend up annually for the past eight years.
The company satisfies investment strategies for both clean fuel and materials, with numerous industries reliant on methanol. Methanex could also prove to be a runaway growth stock in the coming years.
While methanol may not be at the top of most momentum investors’ lists of high-yielding assets, the fact is that the ground is being laid for an impressive bull run in exactly this field. Juxtapose China’s hungry for methanol with supply bottlenecks elsewhere in the world and you have a situation conducive to higher commodity prices on the horizon.
The bottom line
All three stocks listed here would suit a new investors starting a brand new portfolio designed to be held for the long haul. The three stocks are diversified enough to be held in a single basket of income-generated tickers, covering a broad range of industries. While Methanex is a solid choice for materials, Fortis and BCE represent two of the best wide-moat income stock on the TSX.
