For the first time in many years, it is easy to find something to buy. Stocks have been enormously expensive for a long time, making the current state of the market quite attractive. You can practically throw a dart at any stock out there right now and find something to buy. Utilities, banks, telecoms — you name it. They are all starting to be screaming buys right now.
So, where do you start? Quite frankly, I would start by looking at the best stocks in each sector and begin putting together your buy list right now. There’s no reason to look at the only cheap stocks, like the perennially despised oil stocks. Right now you can buy whatever you want and most likely come out smelling like a rose in the end.
So, which are the best of the best to include in your dividend portfolios right now? Which should you start buying, keeping in mind that these companies’ share prices will continue to fall for the next few months? These have to be stocks that you are comfortable owning, so make sure you buy the highest quality.
The biggest bank
Royal Bank of Canada (TSX:RY)(NYSE:RY) is the biggest blue chip of them all in Canada, with well over 100 years of history behind it. The security of the name is present in the fact that its dividend has only recently risen to over 5%. This company has some of the lowest exposure to oil and the Canadian housing market as a percentage of its earnings of all the banks, so it would be a good addition for risk-averse investors.
Furthermore, RBC has exposure to the United States as a large percentage of its earnings. While this might not be appealing to you on a short-term basis, this exposure will be beneficial to the company over the course of the coming decades.
The internet provider
If this virus has shown us anything, it is that wireless networks and the internet are hugely advantageous for modern society. Whether we are stuck at home or are at work, Canadians are making use of BCE’s (TSX:BCE)(NYSE:BCE) huge national network of internet-providing towers and wires. This has been an extremely beneficial service, even pre-coronavirus, and will continue to be in high demand if people are forced to work from home for the foreseeable future.
Right now, you can lock in a dividend of over 6% on this company. This dividend includes a raise of 5% earlier this year. Considering the demand for internet connectivity both now and in the future, it is quite reasonable to assume that dividend increases will continue in the future.
Besides, while it seems difficult to think of right now, driverless cars and smart devices are still right around the corner. In fact, the forced work-from-home environment being played out right now could push forward the move into the connected age even faster.
A dividend giant
Fortis (TSX:FTS)(NYSE:FTS) is the lowest-yielding of the group, with an income of only 4% coming from the stock. Generally, especially during this time of panic, I would focus on earning higher yields. Fortis is the company that has been through everything, however, and is likely to continue to pump out solid dividend earnings as the years go on.
We need power in our house, drive our computers, and watch TV, as we sit stranded in our houses over the next several weeks. Fortis, with its power stations located across Canada and the United States, gives us the energy we need.
Its regulated earnings will continue to drive dividend growth — a trend it has maintained for over 46 years. In the fall of 2019, Fortis increased its dividend by a solid 6%.
The bottom line
Take advantage of the drop to buy premium stocks that have been negatively impacted by the stock market fall. This is the time to build your core position. Don’t get fancy with smaller, less certain stocks. Sell the smaller, riskier names if you have to to get these excellent companies while their stock prices are low.
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Fool contributor Kris Knutson owns shares of BCE INC., FORTIS INC, and ROYAL BANK OF CANADA.