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:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

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

edit Sale sign, value, discount
Dividend Stocks

3 Top Dividend Stocks That You Can Buy Under $50

The global equity markets have turned volatile over the last few weeks amid the fear that the U.S. Federal Reserve …

Read more »

ETF chart stocks
Dividend Stocks

3 TSX ETFs to Buy for Big Dividends

Dividend-paying exchange-traded funds (ETFs) are excellent investment options for passive investors. Apart from instant diversification, would-be investors earn in two …

Read more »

grow dividends
Dividend Stocks

3 of the Best Dividend Growth Stocks That Money Can Buy

Long-term investing has several advantages, which is why so many well-known investors like Warren Buffett recommend it as a strategy. …

Read more »

investment research
Dividend Stocks

3 Cheap Canadian Stocks to Buy Now Before the Dividend Deadline!

Motley Fool investors have been searching high and low for safe stocks in this volatile market. The TSX today doesn’t …

Read more »

Glass piggy bank
Dividend Stocks

How to Accelerate Your TFSA Returns From Dividend Stocks

The stock market saw a correction in January, as investors booked profits ahead of the central bank’s interest rate hikes. The TSX …

Read more »

money cash dividends
Dividend Stocks

Top 3 Dividend Stocks in Canada for 2022

Canada is home to some of the best dividend stocks in the world. With finance, telecoms, and energy dominating the …

Read more »

calculate and analyze stock
Dividend Stocks

2 Top TSX Stocks to Put on Your TFSA Buy List

TFSA investors are searching for undervalued TSX stocks to buy that have the potential to deliver big gains in 2022. …

Read more »

Payday ringed on a calendar
Dividend Stocks

Get Unbelievable Monthly Income With High-Yield Dividend Stocks

The only thing better than a dividend stock is a stock that pays dividends every month. For people who live …

Read more »