Stability, growth, and a stellar dividend history – very few stocks manage to combine all three traits. And when they do, they are usually overvalued, and more often than not, they don’t manage to keep up with their own excellence for several consecutive years.
The true strength of a stock is revealed in market crashes and downturn. Strong stocks manage to bull through and recover, while weak stocks find it hard to gain traction.
Though the performance of the relevant sector plays an important role, some fantastic, unstoppable stocks manage to become outliers in failing sectors. Two stocks that managed to perform amazingly and kept going during COVID-19 are Fortis (TSX:FTS)(NYSE:FTS) and Canadian National Railway (TSX:CNR).
A utility stock
Fortis has the distinction of being one of the oldest aristocrats currently trading on the TSX. The company has been raising its payouts for 46 consecutive years, just two years short of the oldest aristocrat.
The company has been around since 1987 and currently possess an impressive asset portfolio worth $57 billion, serving 3.3 million utility customers (gas and electric), and runs ten different utility operations.
In March, Fortis received the shocks of the pandemic along with the rest of the market, and the stock price fell over 27%. But the company displayed amazing resilience, and the stock restored its valuation to its start-of-the-year mark in a matter of weeks. Currently, it’s trading at $54.2 per share at writing.
Utility stocks are safe anyway, but Fortis’s globally diversified portfolio and a dependable consumer base make it safer even within its utility peers. The stock adds to your portfolio in both dividends and growth. With a five-year CAGR of 11.23% and a yield that’s currently 3.56%, Fortis is one of the top candidates for stocks you should buy in these turbulent times.
A transportation stock
While the air has been thoroughly contaminated by the virus, bringing airborne stocks crashing down to the ground, the Canadian National Railway has been going strong. It’s another reliable engine of growth that you can tie to your portfolio and set it moving at a brisk pace forward.
Like Fortis, CNR stock fell about 25% in March. But CNR recovered even faster and swifter than Fortis, and it’s already past its pre-pandemic peak.
The company is currently trading at $129.8 per share and offers a yield of 1.8%, which seems modest enough, but the dividend growth rate that CNR offers is substantial. An even better growth it offers is in the market valuation, where its five-year compound annual growth rate (CAGR) now sits at 12.73%.
CNR has a strong balance sheet, it offers a lucrative return on equity (24.4%), and the company stands relatively safe thanks to its lean on cargo transportation.
While no stock is utterly infallible, these two stocks are rock solid and will add a lot of stability and growth potential to your portfolio. Another use is building a dividend-based portfolio around these two long-standing aristocrats.
Even if the yields of the two companies aren’t as juicy as you would have liked, the dividend growth pace almost makes up for it.
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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and FORTIS INC.