Canada has some of the best dividend stocks in the world. TSX stocks at large have surged almost 32% since record lows in March. However, despite this rally, investors need to hedge their portfolios with solid defensive stocks if markets fail to hold these gains.
Instead of focusing just on high yields, it would be prudent for investors to look for stocks that pay consistent dividends and can survive these harsh times.
Let’s take a look at those TSX stocks that will stay strong, even if the market crashes again and retest previous lows.
Top TSX dividend stocks: Bank of Montreal
Bank of Montreal (TSX:BMO)(NYSE:BMO) is the fourth-biggest bank in Canada by market capitalization. While many think Canadian banks are a risky bet right now, I think the negativity is blown out of proportion. Top banks in our country, including Bank of Montreal, are well positioned to weather the crisis and keep their growth prospects intact.
The primary reason I suggest Bank of Montreal over its peers is the stock’s valuation. BMO looks notably cheap compared to Royal Bank of Canada and Bank of Nova Scotia stocks from the valuation perspective.
That’s mainly because BMO was relatively slow to recover recently due to its exposure to Canadian oil and gas companies. However, the bank is well capitalized to survive challenging times.
At writing, Bank of Montreal stock is trading at $70.8, indicating a dividend yield of close to 6%. It has been paying dividends for the last 191 years. It has seen multiple crises in the last several years and has maintained payouts to shareholders. BMO will most likely continue to pay consistent dividends in the future as well.
At $51 billion, BCE (TSX:BCE)(NYSE:BCE) is the biggest telecom company in Canada by market capitalization. The coronavirus outbreak will have little or no impact on BCE’s earnings. People will still need access to the internet and to communicate with each other, even if in case of an economic downturn.
BCE’s consistent growth in the wireless segment, along with its presence in media and home internet, offers it a diversified earnings base.
BCE stock is currently trading at $56.3, implying a dividend yield of approximately 6%. It has a long dividend payment history, which will likely continue, even if the economy takes an ugly turn from here.
BCE stock has surged more than 20% since it crashed along with broader markets last month. However, the stock still seems attractive from the valuation standpoint and has the potential for more growth ahead.
BCE’s growth prospects look strong, as the company looks to roll out 5G infrastructure this year.
A $10,000 investment in these two stocks will generate approximately $600 in dividends every year.
Both the above stocks look attractive based on their dividend profiles and discounted valuations. As earlier stated, these two will likely continue to reward shareholders with consistent dividends even if the virus outbreak further dents the economy. Thus, for long-term investors, stable earnings and solid capital gain prospects make these dividend stocks attractive investment propositions.
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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 BANK OF NOVA SCOTIA.