Over the past two weeks, we’ve seen tech stocks take a tumble after months of gains. Despite several high-profile earnings beats, investors scrambled out of tech stocks, as concerns about a bubble mounted. On September 1, many high-profile tech companies like Shopify and Tesla were trading at nosebleed valuations. A few days later, they began to sell off, with fears of an overheated market being the main culprit.
Today, some individual tech stocks still look expensive. While the NASDAQ as a whole is nowhere near as expensive relative to earnings as it was in 2000, some individual tech stocks are getting there. So, fears of a “tech bubble 2.0” are not entirely unwarranted — though we’d expect a much more moderate crash this time around.
The bottom line is, in this environment, it would be wise to have a portion of your portfolio in traditional, defensive industries. With that in mind, here are three “ultra-safe” Dividend Aristocrats that could gain while tech stocks are falling.
Alimentation Couche-Tard (TSX:ATD.B) is Canada’s largest convenience store company. It’s best known for Circle K, a chain of convenience stores/gas stations that it took over from ConocoPhillips in 2003. Circle K is the most popular non-franchised convenience store chain in the United States. It’s second to 7-11 if you include franchised chains. It’s also rapidly taking over the convenience store market in Canada. ATD spent much of the 2010s taking over and re-branding Irving stores as Circle K locations, giving the company a dominant position in Canada.
Despite all of the COVID-19 headwinds in the economy, ATD managed to grow its earnings by 47% in the first quarter. That was made up of increased merchandise sales and lower fuel sales. Had COVID-19 not been a factor, overall earnings would have been even higher. ATD.B stock has a minuscule 0.63% yield right now but is considered a Dividend Aristocrat because of its phenomenal dividend growth.
Fortis (TSX:FTS)(NYSE:FTS) is a staple of Canadian Dividend Aristocrat portfolios. The stock yields 3.6% at today’s prices and is backed by an unbeatable 46-year track record of dividend increases. Fortis’s management aims to increase the dividend by 6% per year over the next five years. That would continue the company’s unbroken dividend-growth streak, although the rate of growth would be lower than in years past. Regardless, you’ve got an ultra-stable utility selling for cheaper than earlier in the year, despite surprisingly decent post-COVID earnings. It’s one of the most reliable dividend plays on the TSX.
iShares S&P/TSX Capped Composite Index Fund
Last but not least, we’ve got iShares S&P/TSX Capped Composite Index Fund (TSX:XIC). Technically, this is not a Dividend Aristocrat, as that term refers to a select group of stocks with 25 years of dividend increases. However, it’s a diversified index fund that has delivered steady dividend growth over the past five years. For newbie investors, this would be an ideal dividend play. Its diversified holdings reduce risk. In exchange for that risk management, you pay fees so minuscule, you probably wouldn’t even notice them. On top of that, you get about a 3% yield and strong potential for dividend growth. Maybe it’s not quite a Dividend Aristocrat, but a perfect dividend play for inexperienced investors.
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 Andrew Button has no position in any of the stocks mentioned. David Gardner owns shares of Tesla. Tom Gardner owns shares of Shopify and Tesla. The Motley Fool owns shares of and recommends Shopify, Shopify, and Tesla. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC and FORTIS INC.