The recent sell-off in the market has unnerved investors. While a profit booking was expected given the stellar bull run over the past several months, many see this as a warning sign for another market crash. Whether the stock market will crash or not is hard to gauge, but volatility is likely to remain high.
Investors who fear another market crash could consider buying these three stocks right now to preserve capital and benefit from consistent dividend income.
As the stock markets remain volatile, investing in the shares of the food and drug retailer Metro (TSX:MRU), should add stability to your portfolio. The sustained demand for its products and offerings and consistent financial performance should help in riding out the volatility.
Metro stock has a very low beta, which implies that the wild market swings are unlikely to impact it much. Its stellar cash flows support consistent dividend payments. The food and pharmacy retailer is a Dividend Aristocrat and has raised its dividends for 26 years in a row. During the last reported quarter, Metro declared a dividend of $0.225, implying a year-over-year growth of 12.5%. Currently, its stock offers a decent dividend yield of over 1.5%.
As consumption pattern shifts online, Metro’s expansion of e-commerce capabilities is likely to supplement its growth. Meanwhile, new store openings are likely to fuel traffic and support its top-line growth.
Emera’s (TSX:EMA) resilient business make it a top investment option amid high volatility. The company’s rate-regulated assets help in generating strong cash flows that support its dividend payouts. Emera generates nearly 95% of its earnings from the rate-regulated businesses, making it relatively immune to the economic cycles. Further, a higher mix of residential customers reduces its exposure to commercial and industrial customers.
Emera’s portfolio of high-quality utility assets and strong rate base growth projection bodes well for the future. The company expects its rate base to increase at a compound annual growth rate (CAGR) of 8.2% through 2022, which is encouraging.
Emera’s dividends have increased at a CAGR of 6% since 2000. Meanwhile, the dividend-growth rate has increased to 10% annually over the last five years. Further, it projects 4-5% growth in its dividends through 2022. Currently, Emera stock offers a healthy dividend yield of 4.5%. Its resilient business and consistent dividend payments are likely to boost investors’ returns, even amid challenges.
TC Energy (TSX:TRP)(NYSE:TRP) runs a resilient business despite operating in the energy infrastructure segment. Its majority of adjusted EBITDA comes from the businesses that are either rate-regulated or have long-term contractual arrangements. Despite the pandemic, TC Energy’s asset utilization rate remained high, while the company continues to generate strong and predictable cash flows.
Similar to Metro and Emera, TC Energy is also known for its long history of consistently paying higher dividends to its shareholders. Its dividends increased at a CAGR of high single digits over the last 20 years. Moreover, TC Energy expects 8-10% increase in its dividends for fiscal 2021 and 5.7% growth after that. Amid volatility, investors are likely to benefit from its resilient cash flows and solid payouts. TC Energy stock offers a high yield of 5.4%.
Whether the stock market will fall or not remains debatable, but the high volatility could lead to knee-jerk reactions. Thus, investors should focus on these three stocks to add stability and earn decent dividend income.
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 Sneha Nahata has no position in any of the stocks mentioned.