Dividend stocks can protect your portfolio from the market crash. These companies deliver a regular stream of income that can be crucial during a bear market. You can use the cash dividends to supplement your income, or you can redirect the capital to buy even more stock.
Dividend stocks aren’t foolproof. Many companies masquerade as reliable dividend payors when times are good. But during a market crash, the payout vanishes.
The goal should be to find dividend stocks that can deliver a regular stream of income regardless of what happens with the global economy. The following two picks have a proven history of doing just that.
Never sell this stock
Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) is a stock you want to own for the next 30 years. It’s also the perfect stock for a market crash.
As its name suggests, Brookfield is a renewable energy company. It owns renewable energy assets around the globe. Its 18,900 megawatts of capacity includes solar, wind, hydro, and battery storage facilities.
Renewable energy assets produce — you guessed it — renewable energy. That energy is critical to the communities that buy it. That’s why entire regions commit to multi-decade contracts that ensure they get access to the energy production.
For example, Brookfield recently purchased $1.2 billion of solar and wind assets in Spain that have 100% contracted cash flows. Highly visible cash flows like this help support a 6% dividend — a payout that has grown every year since the company was founded.
The best news as that the renewable energy boom has just begun. Over the last five years, $1.5 trillion has been invested worldwide in renewable energy assets. Over the next five years, $5 trillion is expected to be invested. The next decade should bring in another $10 trillion.
Brookfield stock can deliver a rock-solid 6% yield throughout the market crash. Long-term growth will be icing on the cake.
Market crash safety
Canadian Utilities Limited (TSX:CU) is yet another example of a bulletproof business. There are few other stocks I’d want to own during a market crash.
Like Brookfield Renewable, Canadian Utilities is focused on low emission fuel sources. Around 75% of its energy comes from natural gas, with the remaining 25% coming from hydro. It also focuses on projects with high cash flow visibility. Roughly 90% of its portfolio is underpinned by long-term contracts.
If you want to understand just how reliable this company is, just look at its dividend history. Canadian Utilities has raised its dividend for 48 consecutive years — the longest uninterrupted streak of dividend increases in Canadian history.
Following the market crash, the dividend yield has risen to 5.2%. But if previous downturns are any indication, Canadian Utilities will emerge unscathed.
During the latest financial crisis, for example, Canadian Utilities stock outperformed the market by double-digits. At the start of 2008, just before the volatility began, Canadian Utilities stock was priced at $24. By the end of 2010, shares had surpassed $27. And don’t forget that dividends continued the entire time!
Throughout one of the worst market crashes in history, Canadian Utilities shareholders generated positive annual returns of around 7%.
While there are dozens of other deals worth pursuing right now, Canadian Utilities is simply the best dividend stock you can own during a bear market.