Although companies in the tech and healthcare space are among the most exciting, not everyone can stomach the volatility that comes with those companies. Some investors are more interested in reliable dividends and growth, even if it comes at a slower pace.
If that sounds like you, I recommend investing in sectors such as consumer staples, industrials, and utilities. Which two companies should you consider adding to your portfolio?
The largest railway network in the country
This is a company I have featured previously as a top dividend stock. Canadian National Railway (TSX:CNR)(NYSE:CNI) is Canada’s largest railway network in terms of physical size and revenue. Its network spans the entire length of the country, from British Columbia to Nova Scotia. The company also reaches the far southern United States. All said, Canadian National Railway has just under 33,000 kilometres of track.
Over the past quarter, institutional investors have been net buyers of Canadian National. Since hitting its bottom during the recent market crash, shares have gained about 40%. Even with a high amount of institutional buying, Bill Gates remains one of the largest shareholders of the company; he owns more than 17 million shares.
Canadian National’s dividend growth streak is the tenth longest in Canada. The company has been able to continue growing its dividend for the past 24 years. Although the company’s forward yield is low at 1.76%, so its dividend payout ratio is 44.06%, indicating that the company may still have a lot of room to continue growing its dividend in the future.
A well-respected dividend distributor
Fortis (TSX:FTS)(NYSE:FTS) is a diversified electrical utility company. It mainly operates in Canada and the United States, with smaller operations in Central America and the Caribbean. As of the end of Q2 2020, Fortis reported $56 billion in assets, which help serve over 3,300,000 customers.
The company has recovered well since the COVID-19 market crash, with shares gaining 26% since its bottom. Year-to-date, Fortis stock is still slightly in the red, losing 0.43% of its value (dividends excluded). For a more complete picture of this company’s long-term performance, we can look at its five year chart. There, you will observe a 43.70% increase in its stock price.
Fortis boasts an even more impressive dividend growth streak than Canadian National. In fact, this company currently holds the second longest active dividend growth streak in Canada (46 years). That means Fortis has been able to increase dividend distributions to its shareholders through several market crashes. Notable events include the 2000 tech bubble and the Great Recession.
The company’s forward dividend yield is 3.55% with a payout ratio of 71.04%. Although the payout ratio is a bit higher than what I would normally expect from dividend paying companies, Fortis’ history of excellent capital allocation gives me confidence in this company.
If you are looking for companies that will provide you will low volatility, I would suggest turning to the industrial and utility sectors. There, you will find companies that lead the country in dividend performance, while giving you steady growth over the long run.
Canadian National Railway and Fortis are two excellent companies to consider for a stable portfolio.
Looking for more stocks to add to your portfolio? Check these out!
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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 Jed Lloren has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. The Motley Fool recommends Canadian National Railway and FORTIS INC.