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3 Dividend Aristocrats That Can Strengthen Your Portfolio Amid Fears of a Market Crash

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After rising over 10% last month, the S&P/TSX Composite Index has continued its upward momentum to increase by around 2% this month. The vaccine euphoria and better-than-expected October gross domestic product (GDP) numbers continued to drive Canadian equity markets. Meanwhile, rising COVID-19 cases worldwide and the challenges in widespread distribution of the vaccine could create headwinds for the markets.

So, amid the uncertain outlook, investors could add the following three safe Dividend Aristocrats to strengthen their portfolios, as dividend-paying stocks tend to outperform during an economic downturn.


Fortis (TSX:FTS)(NYSE:FTS) runs a highly regulated utility business serving around 3 million customers in Canada, the United States, and the Caribbean. It earns 99% of its earnings from rate-regulated assets, thus insulating its financials from market fluctuations.

Meanwhile, the company has planned to invest $19.6 billion over the next five years to increase its base rate to $40.3 billion at an annualized growth rate of 6%. The rate base expansion could drive its earnings and cash flows, thus supporting its dividend payouts.

Fortis has been rewarding its shareholders by raising its dividends for the past 47 years. In September, the company had increased its quarterly dividends by 5.8% to $0.505 per share. So, its dividend yield currently stands at a healthy 3.9%.

Meanwhile, the company’s management has planned to increase its dividends at a CAGR of 6% over the next five years. So, given its stable cash flows, strong growth prospects, and healthy dividend yield, I believe Fortis would be an excellent defensive bet in this uncertain outlook.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) runs a highly diversified utility business, serving approximately 1 million customers. It also operates solar and hydroelectric generating facilities, with an overall capacity of two gigawatts. Meanwhile, it is also constructing additional facilities, increasing its power generating capacity by 1.6 gigawatts.

The company sells 85% of the power generated from its assets through long-term contracts, with the weighted average life of the contracts currently standing at 13 years.

Algonquin Power & Utilities has delivered a strong performance in the last few years, with its adjusted EPS increasing at a CAGR of 13.5% over the previous five years, driven by its strong underlying business and acquisitions. Meanwhile, the company plans to spend $9.4 billion in the next five years, growing its rate base at a CAGR of 11.2%. Further, the company’s management is hopeful that its adjusted EPS could grow at a CAGR of 8-10% over this period.

Supported by its robust and stable cash flows, Algonquin Power & Utilities has raised its dividends for the last 10 years at a CAGR of 10%. The management also expects to increase its dividends at the same rate for several more years. Currently, the company pays quarterly dividends of $0.20 at a dividend yield of 3.8%.

Bank of Nova Scotia

This year, the Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has lost over 6% of its stock value. The increase in credit loss provisions has weighed on the company’s financials, dragging its stock down. However, amid the improvement in economic activities, the company reported sequential growth in its October-ending quarter. Its adjusted EPS rose 39%, while credit losses provisions declined from $2.2 billion to $1.1 billion.

With the pandemic’s end in sight amid the rollout of multiple vaccines, the Bank of Nova Scotia could witness higher credit growth and lower provisions in 2021, thus driving its earnings. Meanwhile, the company currently trades at an attractive valuation, with its forward price-to-earnings and price-to-book multiple standing at 9.7 and 1, respectively.

Bank of Nova Scotia has a strong history of paying dividends. It has raised its dividends by 43 times in the last 45 years. The company is currently paying quarterly dividends of $0.90 per share at an annualized rate of $3.60 and a dividend yield of 5.2%.

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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.

The Motley Fool recommends BANK OF NOVA SCOTIA and FORTIS INC. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

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