2 of the Best Stocks to Buy if You Think We’re in a Bubble

Earning uninterrupted dividend income regardless of the market environment is very possible. The Imperial Oil stock and Toronto-Dominion Bank stock are two of the best TSX stocks to buy today if you think the stock market is in a bubble.

The Toronto Stock Exchange registered a new record high on August 6, 2021 (20,475.40) to push its year-to-date gain to 17.45%. However, some market observers express disbelief that Canada’s primary equities benchmark keeps advancing despite the threat of inflation and emerging coronavirus strains.

They think a market bubble is developing — one that could burst anytime. The situation is odd in that the July 2021 jobs report fell short of economists’ 100,000 estimates. Statistics Canada reported that only 94,000 jobs were added to the economy, although the unemployment rate decreased to 7.5% from 7.8% in June.

While the job growth was positive, Portfolio Management Managing Director Anish Copra said Canada is having a slower recovery. “One encouraging sign is that traditional economic sectors are coming back after a tough period,” Copra added..

Still, investors can’t be complacent. The signs of a bubble are a rapid rise in stock prices, accelerating consumer debt, and rising inflation. All these factors are present apart from the spreading Delta variant. If the bursting of the bubble scares you, seek the safety of the two best TSX stocks.

Best risk and reward option

The energy sector might lose momentum and suffer a big hit if the Delta variant stifles the global oil demand recovery. Your best risk and reward option in any eventuality is Imperial Oil (TSX: IMO). The $24.06 billion crude oil and natural gas producer is a subsidiary of American oil giant Exxon Mobil.

Last year was highly volatile that Imperial Oil had to slash its spending by $1 billion. Management reduced capital outlook by nearly 30% and simultaneously brought down operating expenses by $500 million. Despite the massive industry headwinds, this energy stock remains one of TSX’s buy-and-hold assets.

Imperial Oil hasn’t missed paying a dividend for more than 140 years. Management was true to form in Q2 2021 as it prioritized shareholder returns instead of spending on big growth projects. CEO Brad Corson proudly announced during the conference call, “We have paid a dividend reliably for over 100 consecutive years now and grown it in each of the last 26 years.”

The energy stock trades at $34.15 per share and outperforms the TSX with its 43.43% gain thus far in 2021. If you invest today, the dividend offer is a decent 2.87%.

Ever-dependable blue-chip stock

No one can argue about the Toronto-Dominion Bank’s (TSX: TD)(NYSE: TD) attributes as an ever-reliable income stock for risk-averse investors. Canada’s second-largest bank has gone through market bubbles and the worst economic downturns.

The bank endured the global pandemic with flying colours and ended Q2 fiscal 2021 with $14.6 billion in excess capital. Expect TD to deploy the excess cash for strategic acquisitions and enhancements of its retail footprint in the U.S.

Like Imperial Oil, the bank stock’s dividend track record is over a century (164 years). TD investors aren’t worried about a market bubble. The price could drop but eventually recover as it did in the past. At $84.78 per share, the dividend offer is 3.73%. Note the blue-chip stock’s total return in the last 48.68 years is 37,190.63%.

The best of the lot

Whether it’s a market, asset, or speculative bubble, it could pop without warning. The recourse is to make sure your investments are in the best of the lot before a drastic change happens.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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