When it comes to investing, buying high-quality TSX dividend stocks is a great strategy. Especially in this environment, where there is so much uncertainty that finding high-quality dividend stocks that can weather the pandemic is crucial.
Plenty of stocks will struggle to handle the pandemic as well as an ensuing recession. But what investors also have to think about is what will happen if the market crashes again and goes into more of a U-shaped recovery.
If this were to happen, dividend stocks would be crucial, as those yields would be some of the only ways investors see a return on their money during the bear market.
So, as much as a high dividend yield is significant, the most important thing is a company that can maintain the dividend through thick and thin.
Here are three TSX dividend stocks with reliable yields above 5.5%.
TSX energy stock
Some of its segments may see more of an impact or aren’t quite as defensive; however, Enbridge has significant competitive advantages that keep all its operations robust. So far, that’s led to Enbridge only seeing minimal impacts from the coronavirus.
The impressive defensive business Enbridge operates has given management the confidence to reiterate its guidance for distributable cash flow (DCF) in 2020. This has the stock at least earning DCF of $4.50, vs. its dividend, which it already increased this year, of $3.24.
This massive margin of safety goes to show why Enbridge is one of the top Dividend Aristocrats. As of Monday’s close, the stock was still 27% off its highs and pays a 7.8% dividend.
TSX telecom stock
BCE is like Enbridge in a lot of ways. The company is the leader in its industry, and its business is so important and a staple of the economy that it’s naturally defensive.
BCE, itself has had to withdraw its guidance this year. However, despite that, management has decided to go ahead with all the pre-planned capex.
This just goes to show what a cash cow BCE is and that management isn’t too concerned about its financial position.
In my view, this is more evidence of what a top long-term investment BCE is. It’s also no surprise why the stock is one of the top Dividend Aristocrats on the TSX.
Currently, its dividend yields right around 5.8%, although it’s expected to have a payout ratio that exceeds management’s free cash flow (FCF) target of 65-75%.
However, because management regularly keeps the dividend in a conservative and sustainable range, the increased payout ratio in the short term shouldn’t be an issue.
Plus, in a worst-case scenario, if the ratio continued to increase, BCE could still consider deferring some of its capex to help support FCF before having to decide on the dividend.
The last TSX stock to consider would be the retail real estate fund CT REIT (TSX:CRT.UN).
In general, retail REITs have been one of the hardest-hit industries. However, CT REIT itself has remained mostly immune to the impacts of the coronavirus.
The main reason for this is because Canadian Tire stores make up 91.6% of its rent. Because of this, CT REIT saw April and May rents of roughly 97%, vs. some of its peers that saw April and May rents as low as 55%.
CT REIT today is a great investment. The stock is extremely cheap, and the dividend yields more than 5.6%. That’s extremely attractive in a low interest rate environment.
The one thing investors should be mindful of, however, is that although, at the moment, CT REIT is being supported by Canadian Tire stores making up the majority of its revenue, that could also be a significant risk, too. So, it’s important to be aware of how Canadian Tire is performing.
Dividend stocks could be some of the best-performing businesses on the TSX as we progress through the pandemic. So, make sure whatever stocks you pick have robust operations and a strong balance sheet. This way, there’s a good chance the dividend will remain safe.
In addition to these three top income stocks, here are five of the best value stocks on the TSX.
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Fool contributor Daniel Da Costa owns shares of BCE INC. and ENBRIDGE INC. The Motley Fool owns shares of and recommends Enbridge.