5 Top TSX Dividend Stocks I’d Buy Ahead of a Market Crash

These five TSX dividend stocks from different sectors offer safe dividends and handsome total return potential. Do you own any of these?

| More on:
Hands holding trophy cup on sky background

Image source: Getty Images

Dividend stocks generally outperform during market downturns. They can be used to create a passive-income stream, which can be highly useful during emergencies. Let’s take a look at five such TSX stocks from different sectors that offer safe dividends and handsome total return potential.

Top TSX stock: Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has one of the longest dividend payment histories among Canadian broader markets. It yields 6.4% at the moment, higher than the top Canadian banks. Bank of Nova Scotia has increased dividends by more than 6% compounded annually in the last five years.

Certainly, near-term challenges could weigh on top banks, including Scotiabank. However, it looks relatively better positioned due to its diversified earnings base and high-quality credit portfolio.

Almost all the top banks in the country are better placed to weather the crisis. With some exceptions, all maintained their dividends amid the pandemic. However, Scotiabank stands tall at the moment with its premium yield and attractive valuation.

For long-term investors, BNS is an attractive bet that offers stability and solid total return prospects.

Top TSX stock: Hydro One

Utility stocks are a classic hedge to market crashes. Their slow stock movements and regular dividends generally outperform during uncertain times. One utility stock that I particularly like is Hydro One (TSX:H).

One major factor that differentiates Hydro One from peers is its low-risk operations. The utility, which primarily operates in Ontario, does not involve in power generation, and so, it averts big capital investments. It operates as a transmission and distribution company and is a relatively safe bet.

Hydro One stock yields 4%, higher than TSX stocks at large. Its payout ratio of 73% indicates that the company can comfortably accommodate its dividends. Hydro One aims for a 5% dividend increase per year for the next few years, which is in line with the peers.

Hydro One’s large regulated operations in the most populated province facilitate stable earnings, which ultimately enables stable dividends.

Top TSX stock: Canadian Natural Resources

One top stock that stands out in the Canadian energy space is Canadian Natural Resources. It yields 7% and has managed to grow dividends by 11% compounded annually in the last five years.

Its operational efficiency and diversified product base make it relatively better placed amid volatile crude oil price environment. Canadian Natural stock has rallied more than 75% in the last three months. It still looks attractive due to its current valuation and stable dividends.

Top TSX stock: Rogers Communication

The second-biggest telecom company, Rogers Communication, yields 3.6% at the moment. Rogers leads the 5G race in Canada, which could open a range of growth opportunities for it in the next few years.

Rogers has witnessed strong customer growth in its wireless and cable segments in the last few years. Its earnings stability and predictability bode well for its dividend payments. The stock was relatively fast to recover from the COVID-19 weakness and still looks fairly valued.

Top TSX stock: Restaurant Brands International

Restaurant Brands International (TSX:QSR)(NYSE:QSR) stock currently offers a dividend yield of almost 4% — the highest in the industry. The stock has soared more than 80% in the last three months, notably beating the TSX Index.

Lockdown restrictions are gradually easing, which could see some green shoots for Restaurant Brands. However, although it manages to open all of its restaurants, it will likely operate at a notably reduced capacity. That might hinder its near-term financial and market performance.

However, the picture is a lot rosier for the long term. Restaurant Brands’s large scale, wide geographical footprint, and signature brands could make up for the lost time. Its stable dividend profile and a reasonable valuation make it an attractive buy for long-term investors.

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, RESTAURANT BRANDS INTERNATIONAL INC, and ROGERS COMMUNICATIONS INC. CL B NV.

More on Investing