Financial strain is coming in the months ahead as inflation continues to surge. Canadians will feel reduced purchasing power when their usual monthly budgets can buy fewer goods. Matthieu Arseneau, deputy chief economist at the National Bank of Canada, warns that rising food and gasoline prices will have significant impact on consumers in the first half of 2022.
Arseneau said the toll of inflation on households would be greater than the recent interest hike by the Bank of Canada. He estimates the impact to be equivalent to a 78-basis point hike in the central bank’s policy rate on debt service cost. Meanwhile, financial experts suggest investing in dividend stocks during inflationary times.
Blue-chip companies, in particular, can help you stay ahead of inflation. The top choices today are the Royal Bank of Canada (TSX: RY)(NYSE: RY), TC Energy (TSX: TRP)(NYSE: TRP), and the North West Company (TSX: NWC). Because their dividend payouts are rock-steady, you can boost household income and maintain your buying power.
Largest TSX company
RBC is Canada’s largest publicly-listed company by market capitalization. The $202.16 billion bank has endured the worst recessions and harshest economic downturns in recent memory. Moreover, its 152-year dividend track record should give you the confidence to invest. At $142.71 per share (+7.2% year-to-date), the dividend yield is 3.38%.
Venkat Badinehal, managing director and head of RBC Capital Markets’ financial institutions investment banking, said industry consolidation may continue even amid market volatility caused by the war in Eastern Europe. While the bank hasn’t been active in the M&A department like TD and BMO, Badinehal believes things will eventually stabilize. The timetable, however, is unknown.
Dividend aristocrat
TC Energy is a major player in the oil & gas industry. The $69.31 billion company belongs to a volatile sector but has perennially overcome the headwinds. In the current crisis, pipeline operators are in the limelight. This energy stock is a top performer thus far, in 2021, with a nearly 20% gain. At $70.55 per share, the dividend yield is 5.23%.
The strong points of TC Energy are its diversified high-quality assets and impressive dividend growth streak. Besides three complementary energy infrastructure businesses, the company has raised its dividends for 22 consecutive years. According to management, the $24 billion secured growth projects should support an annual dividend growth of 3% to 5%.
Captured markets
North West Company is as old as time, figuratively speaking. Its roots date back to 1668. The strength of this $1.78 billion company lies in its captured markets. NWC caters to customers in the rural communities and urban neighbourhoods in Canada, Alaska, the South Pacific, and the Caribbean.
Despite COVID-19 and the pandemic-related global supply chain disruptions, net earnings and earnings from operations in Q3 2021 increased 8.9% and 5.9% versus Q3 2020. NWC President and CEO Dan McConnell said the company will continue pursuing growth opportunities through investments in new markets.
The consumer-defensive stock’s total return in 31.5% years is 65,197.88% (22.85% CAGR). At $37.15 per share, current investors enjoy an 8.5% year-to-date gain on top of the 3.98% dividend.
Stay invested
Investors can stay in the market amid the uncertainties by holding blue-chip stocks. The income streams from RBC, TC Energy, or North West Company should be steady and uninterrupted even during inevitable inflationary periods.
