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2 Dividend Aristocrats to Buy Low Now and Hold Forever

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Several theories are floating around, suggesting that another stock market crash is nearing. The “black swan” event and “cobra effect” are the latest market behaviour descriptions in 2020. Investors are on edge because of the analysis. The problem is that no one can tell when it will happen.

The COVID-19 outbreak is bad enough, but the prophecies are doubly upsetting, especially if you have long-term financial goals. However, negative outlooks shouldn’t cause fear or panic. Invest in Dividend Aristocrats. You can buy them low today and hold the stocks forever.

An ideal buy-and-hold stock

Canada Natural Resources (TSX:CNQ)(NYSE:CNQ) counts as one of the ideal buy-and-hold stocks. This energy stock is also one of the top Canada Pension Plan (CPP) stocks. Likewise, the dividend-growth streak of this $26.82 billion oil producer is nearly two decades. You can expect a steady income stream for years.

The company suffered more than $1 billion in losses in Q1 2020 due to the carnage in the oil and gas industry. Investors were anticipating a dividend cut until management announced none is forthcoming. CNR’s liquidity position is strong, while its assets will continue to generate sustainable and significant free cash flow in the long haul.

CNR implemented production cuts in oil sands operations and high-cost conventional projects to counter weak oil prices. At the current price of $24.37 and a dividend of 7.19%, $20,000 seed money will create an everlasting income of $1,438. Don’t discount a potential capital appreciation when the sector rebounds post-pandemic.

Small but reliable

Canadian Western Bank (TSX:CWB) is another superb, cheap option for risk-averse investors. You can purchase the bank stock at roughly a 29% discount ($22.08 per share). The dividend offer is a hefty 5.09%. This $1.92 billion financial institution is outside of the Big Five bank circle but is a Dividend Aristocrat just the same.

The average dividend-growth rate over the recent decade is 9%, while dividends have increased for 28 straight years. Canadian Western scores high in terms of consolidated efficiency ratio in the banking industry. Notably, EPS is growing at a 13% clip over the last three years.

The diversified business model, along with strong capital and liquidity levels, should help Canadian Western endure the prevailing headwinds. However, operating results in the ensuing quarters will not be as high as before due to higher loan-loss provisions. Income-wise, a prospective investor will generate $986 in lasting passive income from a $20,000 investment.

Manageable risks

The gloomy scenarios many market observers are painting create mistrust or fear of the market. Still, the TSX is contradicting the dire prognosis. The index has risen from epic lows and is displaying resiliency, despite a declining economy. Buying opportunities are plenty, as you can purchase some of the best stocks at bargain prices.

The future is worrisome, but you can mitigate the risks by taking positions in Canada Natural Resources and Canadian Western Bank. Both companies have earned their Dividend Aristocrat status. Through the years, the stocks have proven their reliability as income providers to risk-averse investors.

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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 Christopher Liew has no position in any of the stocks mentioned.

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