Market Crash? 3 Dividend Stocks That Can Protect You

Investors worried about a second market crash should seek out dependable dividend stocks like Emera Inc. (TSX:EMA) and others.

| More on:
analyze data

Image source: Getty Images

The S&P/TSX Composite Index rose 45 points on October 15. Canadian stocks encountered turbulence in September but have managed to bounce back and stabilize in October. Still, investors should be aware of the risks of a market crash. In late August, I discussed the Buffett indicator. This indicator takes the market capitalization in a national market and compares it to gross domestic product. The Buffett indicator shows that North American markets are overpriced right now.

Today I want to look at three dividend stocks that can protect your portfolio in a market crash. Let’s dive in.

Why utility dividend stocks are perfect in a market crash

Emera (TSX:EMA) is a Nova Scotia-based utility. Its shares have climbed 3.6% in 2020 as of close on October 15. Utility stocks have proven to be reliable in the face of a global pandemic. Emera and its peers are still a great hold, especially if a second market crash arrives. They belong to the handful of essential services that will always run no matter how the pandemic progresses.

In Q2 2020, Emera reported net income of $581 million or $2.37 per share in the year-to-date period, up from $415 million or $1.75 per share in the first six months of 2019. Moreover, operating cash flow rose $41 million year-over-year to $816 million.

Shares of Emera last had a favourable price-to-earnings ratio of 16 and a price-to-book value of 1.6. It offers a quarterly dividend of $0.637 per share. That represents a solid 4.5% yield.

Grocery retailers thrived in a very difficult year

Speaking of essential services, it is hard to find one more important than food supply. Grocery retailers have thrived in 2020. Loblaws (TSX:L) is the largest food retailer in Canada. This sector offers some of the most reliable defensive dividend stocks on the TSX in the event of a market crash.

Loblaws released its second quarter 2020 results on July 23. Revenue rose 7.4% from the prior year to $11.9 billion. It posted food retail same-store sales growth of 10% while drug retail same-store sales fell 1.1%.

Shares of Loblaws currently possesses a P/E ratio of 25 and a P/B value of 2.2, putting Loblaws in solid value territory in comparison to its industry peers. It last announced a quarterly dividend of $0.315 per share, which represents a modest 1.8% yield. This is a solid defensive dividend stock to own for those worried about a market crash.

Market crash: Telecom dividend stocks are also a solid target

Telus is one of the largest telecommunications companies in Canada. Its shares have fallen marginally in 2020. However, the stock is up 6% year over year. Telecom is undergoing a transformation as consumers move away from cable, but there is still big room for growth in wireless. These stocks can still protect your portfolio in a market crash.

In Q2 2020, Telus delivered revenue growth of 3.6% and free cash flow growth of 57%. The stock last possessed a favourable P/E ratio of 20 and a P/B value of 2.5. Telus currently offers a quarterly dividend of $0.291 per share, representing a 4.8% yield.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Coronavirus

healthcare pharma

TSX Stocks in the Healthcare Industry: Which Ones Are Worth Your Money?

These healthcare stocks all offer different investment opportunities for investors, but which are the best buys on the TSX today?

Read more »

Man considering whether to sell or buy

Air Canada Stock is Down 16% – Time to Buy?

Air Canada stock has sure taken its bruises. Will recovering demand this year and next be enough to offset rapidly…

Read more »

little girl in pilot costume playing and dreaming of flying over the sky

Air Canada Stock: How High Could it go?

AC stock is up 29% in the last six months alone, so should we expect more great things? Or is…

Read more »

eat food

Goodfood Stock Doubles Within Days: Time to Buy?

Goodfood (TSX:FOOD) stock has surged 125% in the last few weeks, so what happened, and should investors hop back on…

Read more »

stock data
Tech Stocks

If I Could Only Buy 1 Stock Before 2023, This Would Be It

This stock is the one company that really doesn't deserve its ultra-low share price, so I'll definitely pick it up…

Read more »

Aircraft Mechanic checking jet engine of the airplane

Air Canada Stock Fell 5% in November: Is it a Buy Today?

Air Canada (TSX:AC) stock saw remarkable improvements during its last quarter but still dropped 5% with more recession hints. So,…

Read more »

Airport and plane

Is Air Canada Stock a Buy Today?

Airlines are on the rebound. Does Air Canada stock deserve to be on your buy list?

Read more »

A patient takes medicine out of a daily pill box.

Retirees: 2 Healthcare Stocks That Could Help Set You up for Life

Healthcare stocks offer an incredible opportunity for growth for those investors who look to the right stocks, such as these…

Read more »