When building an investment portfolio to save and compound your capital for years, it’s crucial that many of the stocks you buy are resilient businesses that you can count on in market pullbacks and recessions. That’s why dividend stocks are some of the most important investments Canadian investors can make.
Almost every stock will rally during bull markets. But it’s the periodic market pullbacks that can weigh on your long-term performance if you’re portfolio doesn’t have enough resiliency. So it’s crucial to build a portfolio that’s as resilient as possible while still offering attractive growth.
This is why it’s crucial to find high-quality companies that can grow well in the good times with highly resilient operations when the economy slows down or stocks sell-off.
So with that in mind, here are two Canadian dividend stocks that would be ideal if you’re looking to build a stable and consistently growing portfolio.
Image source: Getty Images
High-quality utilities are some of the top Canadian dividend stocks
Utility stocks can be some of the best stocks to buy if you want to add stability to your portfolio while simultaneously growing your passive income.
However, investors should be careful not to go too overweight utilities, as these stocks, while offering consistent growth, will generally expand their operations at a slower pace than the rest of the market.
Right now, utilities make up less than 5% of the S&P/TSX Composite Index. So while there may be prudent times to have a little more exposure to utilities, they should never make up that much of your portfolio.
There are several high-quality utility stocks to choose from for Canadian investors, but one of the best today has to be Emera (TSX:EMA).
The utility stock is well diversified with assets spread across North America, it’s a Dividend Aristocrat, and its current yield is more than 4.4%.
Plus, according to the Canadian dividend stock’s guidance, over the next three years, investors can expect that dividend to continue to grow annually, between 4% and 5%. In addition, Emera’s in the midst of a five-year capital plan that will see it expand its rate base at a compound annual growth rate of roughly 8% a year.
This is attractive because while Emera offers low-risk growth, it’s also a company you can count on to protect your capital in a market correction and continue paying you dividends through a potential recession.
So if you’re looking to add a little more stability to your portfolio, or you’re underweight utilities, Emera is a top stock to consider today.
A top infrastructure stock to own for years
Another high-quality Canadian dividend stock to buy for a stable and growing portfolio is Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP). Brookfield has a business that’s nearly as defensive as utilities. In fact, one of the four main industries it’s invested in are utility companies.
However, Brookfield offers investors far more growth potential, as the fund aims to grow investors’ capital by up to 15% annually.
One of the main differences is that Brookfield retains more capital to invest in new opportunities. So although it’s still a highly robust dividend stock, its yield is slightly lower at 3.5%.
Another major difference is that Brookfield invests in and acquires whole companies or assets rather than building and developing its rate base as Emera and other utility stocks.
And of course, because it’s exposed to other industries, such as transportation, data, and midstream energy, and because these operations are located all around the world, Brookfield has more opportunities to find higher growth investments.
The stock itself might be a little more volatile during market pullbacks and recessions. However, for the company itself, while its operations might temporarily be impacted, management would likely use the opportunity to expand its portfolio and take advantage of attractive discounts.
So if you’re looking for a high-quality Canadian dividend stock you can commit to for years, Brookfield Infrastructure is one of the best to buy now.
