The S&P/TSX Composite Index rose 60 points on July 20. Earlier this month, I’d discussed the prospects for a second market crash this year. Discounts are scarce on the TSX right now, and valuations are sky-high after a red-hot finish to the spring. Because of this, I’d also suggested that Canadians may want to consider piling into dividend all-star stocks. These dividend stocks are “all-stars” due to their stability, yield, and track record.
Should you expect a second market crash in 2020?
Investors should not waste time trying to predict when a market crash will take place. Instead, they should pay attention to the fundamentals and take a long-term outlook. We can take the Warren Buffett approach, which aims to add stocks that offer strong value.
On the other hand, there is also renewed optimism, as leaders in the developed world have developed a mammoth recovery packages. European Union nations just agreed on a $2.1 million relief plan that has led to a spike in Europe-based indexes.
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Why I’m piling into dividend all-star stocks
Rather than attempt to time investments in anticipation of a market crash, I’m on the lookout for high-quality dividend stocks. This way, investors can take profits in some of the highest-performing growth stocks over the past few months and reinvest them in reliable equities that offer steady income. Below are three of my favourite all-star dividend stocks to snag right now.
Three dividend stocks to defend against a market crash
Methanex (TSX:MX)(NASDAQ:MEOH) is a Vancouver-based company that supplies, distributes, and markets methanol around the world. Its shares have dropped 45% in 2020 as of close on July 20. However, the stock has increased 47% over the past three months.
In Q1 2020, the company revealed that global methanol demand declined by 7% in the face of the COVID-19 pandemic. Adjusted EBITDA was mostly flat from the fourth quarter of 2019. Meanwhile, adjusted revenue fell to $676 million compared to $800 million in the prior year. The company maintained a strong liquidity position with $823 million in cash at the quarter’s end.
Shares of Methanex last had a favourable price-to-earnings ratio of 18 and a price-to-book value of 1.1. Moreover, it was forced to reduce its quarterly dividend by 90%. It now offers a modest 0.7% yield.
Power Corporation is a Montreal-based financial services and asset management company. Its stock has dropped 22% in 2020 so far. Power possesses an impressive track record and is well diversified, making it a good option to protect against a market crash. Better yet, its shares last had a favourable P/E ratio of 10 and a P/B value of 0.8. Power offers a quarterly dividend of $0.4475 per share, representing a tasty 7.3% yield.
Sun Life Financial is a top insurance provider and financial services company. Its shares have been mostly flat in the year-over-year period. Sun Life possesses an excellent balance sheet. The stock last had a P/E ratio of 13 and a P/B value of 1.4. This puts its shares in attractive value territory. In May, Sun Life paid out a quarterly dividend of $0.55 per share. This represents a solid 4.1% yield.
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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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends METHANEX CORP.