In the current stock bear market, buying any stocks is synonymous with catching falling knives. Risk-averse investors should avoid the energy, travel, and tourism industries, including airline and hotel stocks.
Instead, consider these top-notch dividend stocks that lead their industries and have strong defence against a vicious bear attack. They have been holding up better than most.
After this crash is done, investors will first fly back to these quality dividend stocks.
Fortis stock is your fort in a stock bear market
Fortis (TSX: FTS)(NYSE: FTS) stock’s low volatility is demonstrated in the current stock market crash. So far, the TSX has corrected 29% from its high, while Fortis stock has retreated 18%.
People use electricity and gas with no regard for the state of the economy. In fact, they are trying to stay/work at home as much as possible to avoid contracting viruses, which could increase the use of electricity and gas.
However, the coronavirus outbreaks have triggered lower traffic or even temporary closures of businesses like restaurants. As a result, higher electricity and gas usage at homes probably won’t cover for the lower usage at businesses. And this will impact Fortis’s near-term bottom line.
Defensive Fortis stock increased its dividend for 46 consecutive years. Investors can expect dividend growth of about 6% per year over the next few years.
After the price cut, Fortis stock is fairly valued and offers a safe dividend. Under a normal market, its secure yield of 4% would be very attractive. However, by the looks of things, the utility stock can slide further over the next few months.
Consider starting to buy Fortis stock at a 5-6% yield, which is a price target range of $31.80 to $38.20 per share.
Intact Financial remains intact
One glance at Intact Financial (TSX: IFC) stock and you’d be able to tell it’s of marvelous quality. After several years of consolidation, the dividend stock broke out and delivered total returns of nearly 45% in 2019.
Along with the stock market downturn, the stock has declined by about 22%. Now, the stable insurer trades at a reasonable valuation for its growth.
Intact Financial has a scale advantage. It is an industry leader with 17% of market share compared to the runners-up competitor that has 10%. As a result, it tends to outperform its peer group’s return on equity by about 5%. Its five-year return on equity is a solid 12%.
Over the last 10 years, Intact Financial has increased its net operating income per share by 10% per year on average, which led to a healthy dividend growth rate of 9%. At writing, the financial stock offers a yield of 2.7%.
At under $121 per share at writing, the defensive dividend stock trades at a decent forward price-to-earnings ratio of 14.8. With the gyrations of the market, investors can probably pick up the stock at an even lower price.
Consider starting to buy the stock at $83 per share for an initial yield of 4%.
Investor takeaway
In a stock market crash, even the good stocks are thrown out of investors’ portfolios along with the bad ones. If you hold quality businesses, but their stocks are in the red, there’s no need to panic sell. However, if you want to buy stocks, consider quality names like Fortis and Intact Financial after they have been sold off.
I believe they can get cheaper in today’s market environment. Therefore, I encourage interested investors to revisit the stocks at the suggested price ranges.
