Whether through a second wave of infections or a looming housing market decline, another stock market crash could be on the cards before 2020 ends. The year that has been a challenging affair for the world might still have more up its sleeve. There is nothing as devastating as a second market crash within a year for investors.
However, the previous bear market might have instilled a sense of caution in investors. The quick rebound after the March 2020 bottom was a relief for many. However, there are worrying signs of another market crash. I would advise being better prepared for it this time by reducing your position in high-risk equities.
Ideally, you should consider investing in high-yield dividend stocks. Companies that can continue to provide you returns through a volatile market can put you in a better position to buy high-quality assets for a bargain as the dust settles.
I will discuss the Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN). The two companies can provide your capital with a haven during the downturn and grow your wealth through the market crash.
A reputable financial institution
Scotiabank is a long-standing financial institution that has provided its investors with solid returns over the years. Canadian banks are always a reliable long-term investment for any kind of portfolio. Rate cuts and increased provisions for credit losses took a toll on BNS. At writing, the bank’s share prices stand at $55.29, and it is down by almost 25% year to date.
A weak economic outlook and the possibility of more jobless claims does not paint a pretty picture for the banking sector. However, BNS has exposure to high-quality growth markets and a sustained increase in loans and deposits. These factors put the bank in a favourable position to generate substantial revenue whenever economic activity picks up.
BNS does not rely as heavily as most of its peers on the housing market. It derives a significant portion of its earnings from stable segments like commercial and personal banking. At its current price, BNS has a juicy 6.51% dividend yield that can grow your wealth.
Power and utilities
Algonquin is a straightforward wealth generation stock in my books. It is most often thought of as a utility stock because two-thirds of its business comes from utility assets. That fact alone places it in a favourable position for a market crash. Utility companies can continue generating revenue due to the essential service they provide.
Consumers can’t go without water, gas, or electricity. Even in a shrinking economy and high unemployment rates, a company like Algonquin can continue generating income. Algonquin is different from other utility companies because it goes a step further. The company also operates in various jurisdictions that reduce its regulatory risks.
To make the deal even sweeter, Algonquin also has a considerable integration of renewable energy-generating assets within its infrastructure. Utilities tend to slow down growth amid market expansions. Algonquin’s access to a booming renewable energy industry can allow the stock to grow even in a growing economy.
At writing, the stock is trading for $18.13 per share. It is back to its price at the start of 2020, and it offers its shareholders a juicy 4.54% dividend yield.
Many investors can expect to see double-digit losses to their portfolios with a second market crash in 2020. However, you can position yourself to grow your wealth through it. Investing in high-yield and reliable dividend stocks can allow you to achieve that goal. To that end, BNS and Algonquin can be excellent stocks to add to your portfolio.
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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.