Canadian Retirees: 2 Safe Dividend Stocks to Buy in a Fragile Market

Fortis (TSX:FTS)(NYSE:FTS) and another safe dividend stock that Canadian retirees should buy while they’re still unloved and undervalued.

| More on:
Cogs turning against each other

Image source: Getty Images.

Canadian retirees are between a rock and a hard place these days. Higher inflation is a threat to one’s cash hoard and equity portfolio. Rate hikes also do not bode well for equities and most fixed-income securities. Gone are the days where one can retire and live off the high coupons of generous risk-free debt instruments.

Undoubtedly, retirees have it tough. Bond yields are ridiculously low and unrewarding. Heck, they may not even be worthy of holding anymore. Equities, however, may be too much volatility for many older retirees to handle. Still, to thrive in today’s difficult market environment, one must change with the times. That means diversifying across a broader mix of asset classes and placing a larger chunk of one’s nest egg in dividend-paying equities.

Investing in stocks doesn’t have to be a risky proposition, especially if you’ve got a long-term time horizon. Many safe Canadian dividend stocks are very bond-like in nature. It’s these “bond proxies” that I think retirees can lean on through these difficult times, where prospective returns are low — so low such that it encourages greater risk-taking.

Top “safe” dividend stocks for Canadian retirees

In this piece, we’ll look at Fortis (TSX:FTS)(NYSE:FTS) and Hydro One (TSX:H), two of my favourite high-yield “safety” stocks that can act as a core foundation to any income-oriented retirement fund. Without further ado, let’s have a closer look at each “Steady Eddie” utility stock to determine if it’s a right fit for you and your unique situation.

Fortis

Fortis is quite the uneventful stock. With a bountiful 3.6% dividend yield and an above-average growth rate (as far as utilities are concerned), Canadian retirees can expect 5-6% in annualized dividend growth over the next decade. The company has one of the most secure operating cash flow streams out there, and for that reason, it’s one of my favourite “bomb-shelter” holdings to hold in case market waters become rough.

The 0.06 beta implies Fortis stock has a near-zero correlation to the broader markets. So, when the next market correction hits, odds are, Fortis stock will do a better job of holding its own, allowing it to buoy your portfolio above the water. Moreover, the odds are also greater that Fortis will be a lonely green arrow in a sea of red. I like to view the low beta and high yield as “shocks” for your retirement fund when volatility strikes.

Although there are no guarantees that Fortis won’t plunge in the next market-wide meltdown, I think Fortis’s traits make it a must-own stock, especially in today’s uncertain environment.

Hydro One

For those looking for more yield and low volatility, it’s tough to do better than Hydro One. The stock boasts a 0.19 beta alongside a slightly juicier 3.5% dividend yield. The company has a virtual monopoly over Ontario’s transmission lines. Because of this, regulations have made it tough for Hydro One to jack up prices on its services, making it harder to grow.

Indeed, Hydro One isn’t a company you’d buy if you want meaningful growth over time. Still, the high degree of regulation, which can be both a blessing and a curse, makes Hydro One’s payout one of the safest on the TSX.

With shares trading at just 10.1 times trailing earnings, Hydro One is also a great value at these levels. So, as others look to take more risk, it can literally pay dividends for Canadian retirees to take a step back and scoop up the underrated defensive dividend stocks.

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 Joey Frenette owns shares of FORTIS INC. The Motley Fool recommends FORTIS INC.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »