Stock Market Crash: 2 Top Dividend Stocks I’m Buying With My TFSA

Fair yield and strong growth potential make these two names attractive amid a market crash.

| More on:

Stock markets are looking alarmingly weak as the virus outbreak has extended almost across the globe now. What’s more concerning is, we still do not know how and where this is going to end.

As of March 18, exactly a month since markets started crashing on coronavirus, the S&P/TSX Composite Index has pummeled more than 35% since its record high. In my view, investing in top-quality businesses that pay regular dividends will be the best plan to tackle the market crash.

Emera

A regulated utility Emera (TSX:EMA) will be a safe bet for regular income-seeking investors, particularly amid a market crash. Regulated utilities generally pay stable dividends as they generate steady cash flows. Emera generates almost two-thirds of its total earnings from the US operations.

The stock yields approximately 5% at the moment and will pay dividends of $2.45 per share in 2020. The company plans to increase its dividends by 4%-5% per year through 2022, which is in-line with the industry average. In the last five years, Emera increased its dividends by a handsome 10% compounded annually.

Emera stock has fallen approximately 20% amid broader market weakness since late February. However, the recent selloff has brought the stock to a relatively fair valuation.

It would be highly advisable for investors to take shelter in utility stocks in the current market scenario, as utilities’ earnings are generally stable even in case of an economic downturn, ultimately making their dividends safe.

Investors generally see utilities as boring and uninteresting because of their slow stock movements. However, it should be noted that slow-but-stable stock appreciation and regular dividends could reap handsome returns for investors over time. In the last five years, Emera returned 66%, including dividends, while the TSX Composite returned -14%.

Saputo

A $13 billion Saputo (TSX:SAP) is the top fluid milk processor and cheese manufacturer in Canada. It is one of the top 10 dairy processors globally and has 67 plants worldwide.

Saputo’s geographical diversification in Canada, the U.S., Australia, and the U.K. bodes well for its earnings stability. It generates a large portion of its revenues from cheese sales in the U.S. Saputo’s large-scale operations and leadership position in the dairy industry add up to an attractive investment thesis for long-term investors.

Saputo stock has corrected more than 25% since last month, in-line with the broader markets. However, that has made the stock look even more attractive from the valuation standpoint.

Saputo stock currently offers a dividend yield of 2.2%, lower than the equities at large. However, its stable payouts and a dividend increase potential make it a convincing case for income seekers. Notably, it managed to increase dividends by almost 6% compounded annually in the last five years.

Even if Saputo’s earnings get hammered in a couple of quarters due to lower demand amid the virus outbreak, its market share and cost advantageous position will likely reap significant benefits for the company and its investors in the long term.

The above two stocks look attractive from the total return potential amid a market crash. It would be a lucrative opportunity, particularly for Tax-Free Savings Account (TFSA) investors, to enter at these levels.

The capital gains and dividends will be tax-free throughout the life of the investment and even at withdrawals.

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 Vineet Kulkarni has no position in any of the stocks mentioned. The Motley Fool recommends SAPUTO INC.

More on Dividend Stocks

Confused person shrugging
Dividend Stocks

Where Will Fortis Stock Be in 5 Years?

Where Fortis stock will be in five years highly depends on the market sentiment at that time. Investors can target…

Read more »

A plant grows from coins.
Dividend Stocks

3 Dividend-Growth Champions That Could Keep Raising Payouts in Any Market

These three Canadian stocks with consistent dividend growth are excellent buys to boost your passive income and strengthen your portfolios.

Read more »

ways to boost income
Dividend Stocks

TFSA to $100K: 2 Dividend-Growth Stocks to Power a Tax-Free Fortune

Building a tax-free fortune through the TFSA is possible with two top-tier dividend-growth stocks.

Read more »

dividends can compound over time
Dividend Stocks

1 Magnificent Canadian Dividend Stock Down 21% to Buy and Hold for Decades

Down 21% from all-time highs, TD Bank is TSX dividend stock that offers a tasty dividend yield of 5.1% in…

Read more »

senior man smiles next to a light-filled window
Dividend Stocks

Canadians: 3 Big Changes Coming to CPP and OAS in 2025

If you don't expect to get enough CPP and OAS to retire, you can invest in ETFs like iShares S&P/TSX…

Read more »

woman retiree on computer
Dividend Stocks

2 Stocks Canadians in Their 50s Should Own

Choosing the right growth stocks when you are just a few years away from your retirement can have enormous implications…

Read more »

Man data analyze
Dividend Stocks

Invest $33,000 in These 2 Canadian Stocks to Cash in on Trump’s Tariffs

These two stocks may not seem the most obvious, but could see an increase in demand as tariffs come down…

Read more »

Dividend Stocks

Prediction: Here Are 2025’s Most Promising Canadian Stocks

From energy giants to e-commerce pioneers, discover three Canadian stocks poised for growth in 2025 as they leverage market leadership…

Read more »