The rebound of the S&P/TSX Composite Index in October 2021 represents its biggest monthly gain since November 2020. However, as we usher in a new November, the market is vulnerable to a correction. Rising inflation and supply chain disruptions are imminent threats to stability.
Investors are on guard for a possible severe downturn that hasn’t happened since the selloff in March 2020. Thus, it makes perfect sense to rebalance your portfolio if a pullback scares you. Fortis (TSX:FTS)(NYSE:FTS) will undoubtedly be top of mind again in the utility sector.
Meanwhile, Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) is another go-to stock, whether as a back-up to Fortis or a standalone core holding. Both companies can endure economic meltdowns, given the critical nature of their businesses.
First-rate defensive asset
Fortis’s defensive qualities stem from its Dividend Aristocrat status. Its dividend-growth streak of 48 consecutive years is a compelling reason to own this stock in good and bad times. Moreover, this $25.95 billion electric and gas utility company derives nearly 100% revenues from highly regulated assets.
You can purchase a Fortis share at $55.09 today to partake of its 3.88% dividend. For illustration purposes, a $50,000 investment would produce $1,940 in dividends. Since the payout is four times a year, you’d have a recurring quarterly income of $485. You can keep reinvesting dividends and not touch the principal for the power of compounding.
The best part about Fortis is that it requires minimal monitoring or none at all. It’s the kind of asset you purchase today and forget. You can cope with inflation, and the dividend is your financial cushion should the price decline. Regardless of the economic environment, your income streams will keep coming.
On September 29, 2021, the board of directors approved an increase in dividends. For would-be investors, this most recent increase is consistent with management’s plan to increase the payouts by 6% annually through 2025. Thus, besides capital protection and safety of dividends, there’ll be consistent income growth for decades.
Brookfield Infrastructure is the flagship infrastructure company of Brookfield Asset Management. This $21.53 billion company owns and operates utilities, transport, midstream, and data businesses. The latest development is its completed acquisition of Inter Pipeline, which includes its crown jewel: the Heartland Petrochemical Complex.
On the stock market, BIP.UN’s performance is steady with its 19% year-to-date gain. At $72.86 per share, the dividend yield is 3.55%. Brookfield Infrastructure may not be a fast dividend grower, but it has low economic sensitivity and is equally resilient as Fortis.
Brookfield’s infrastructure operations generate stable cash flows and boast high margins internal growth projects. It has the size and financial capacity to pursue acquisition opportunities to meet the global economy’s ever-growing need for infrastructure.
In the first half of 2021, the company reported a net income of US$542 million — an 834% year-over-year growth. Its CEO Sam Pollock said, “We are well positioned to sustain our momentum into the second half of the year as market conditions are favourable for our business.” For prospective investors, expect Brookfield Infrastructure to continue with its successful record of acquisitions.
Fortis and Brookfield Infrastructure Partners are solid investments that you can hold for years. The businesses can endure a financial meltdown, while the dividend payments should be rock solid. Lastly, you’re buying peace of mind.