3 Dividend Stocks to Buy in Up or Down Markets

Even though you can maximize the return potential of a dividend stock by buying in a down market, that shouldn’t be the primary merit you look for.

Many stocks are worth buying only when they drop below a certain price/valuation level. That’s because when you buy them at a discount, their return potential, whether it’s a heightened yield or modest capital-appreciation potential, is enhanced.

However, if you are looking for dividend stocks that are good buys regardless of how the market is performing, there are three that should be on your radar.

A telecom company

Telus (TSX: T)(NYSE: TU) is part of Canada’s aggressively consolidated telecom industry — one of the three giants. It boasts an impressive clientele, especially when it comes to wireless and internet users.

The company is making great strides in 5G and is currently pursuing aggressive regional growth in Quebec, that’s expected to cost about $11 billion in the next four years. This is expected to grow its user base by a significant margin.

Telus is a well-established aristocrat currently offering a decent 4.3% yield. It’s also a decent dividend grower and has raised its payouts from $0.2525 in 2018 to $0.3386 in 2022 — a 34% rise in five years, enough to outpace inflation, even at its current drastic rate.

It also offers a decent capital-appreciation potential, so no matter when you buy it, the overall return potential would be quite decent if you hold it long term.

A utility company

Emera (TSX: EMA) is a Nova Scotia-based holding company with multiple utility businesses to its name, including seven regulated companies. It has about $34 billion in assets and 2.5 million customers in Canada, the U.S., and the Caribbean.

As a utility business, especially such a diversified one, it’s an inherently safe investment, but it also gets more points as an aristocrat that’s currently offering an attractive 4.19% yield.

But the return potential of Emera has another powerful component — i.e., its capital-appreciation potential. The stock has returned about 90% in the last decade, following a steady and predictable growth pattern. The combined return potential is quite significant.

You can maximize it by investing a decent amount and choosing DRIP to grow your stake in the company by a sizeable margin.

An alternative investment company

While a bank is the first entity that comes to mind when you need a personal loan, they are not a possible option for many Canadians. They have to turn to alternative lenders like goeasy (TSX: GSY), which has grown at a magnificent pace, serving this particular clientele. With its network of over 400 branches, it has a presence matching most small banks.

goeasy is a powerful buy in almost any market, though it’s currently available at a heavily discounted price. The stock has grown almost 1,600% in the last 10 years, and even if you lose half of the growth potential by buying it at or near the peak, you can still make more money in one decade than most growth stocks will help you make in three.

Foolish takeaway

Even when you are investing in a dividend stock, you have to look at the holistic return on investment (ROI) potential. If a company is growing its payouts but reducing the invested capital by a similar margin, the net returns might worsen over time.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends EMERA INCORPORATED and TELUS CORPORATION.

More on Dividend Stocks

dreaming of financial success
Dividend Stocks

3 Questions to Ask Before Buying a Dividend Stock

Buying a dividend stock? Here are three questions to help you look beyond the yield, with examples from Enbridge, Fortis…

Read more »

Woman in private jet airplane
Dividend Stocks

Make $100 a Month Tax-Free: How Much to Invest in Diversified Royalty and Where

The TFSA is the ultimate investment account to place your money and earn tax-free income.

Read more »

man in bowtie poses with abacus
Dividend Stocks

Passive Income From Dividends: What Canadians Can Realistically Expect

Here's the actual dividend math the passive income gurus won't show you.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

RRSP, TFSA or Both? A Quick Guide by Income Level

Your RRSP and TFSA are complementing accounts that you can use to shield your income from taxes.

Read more »

Real estate investment concept with person pointing on growth graph and coin stacking to get profit from property
Dividend Stocks

Buying Your First Home? The $8,000 FHSA Deduction Most Renters Miss

An eligible renter's $8,000 FHSA contribution can save $2,400 at a 30% tax rate, with the purchase date guiding investments.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Building Your First Dividend Portfolio: Where Canadians Can Start

Here's my dividend stock picking guide, along with a dividend ETF to make it hands-off.

Read more »

gift is bigger than the other
Dividend Stocks

Enbridge vs. Telus: Which Pays More Reliable Income Through 2030?

Let’s compare Enbridge and Telus on financial performance, dividend history, yield, growth prospects, and valuation to see which offers the…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

TFSA Income: 2 Top TSX Dividend Stocks to Collect Steady Cash in Your Golden Years

These top Canadian stocks have delivered steady dividend growth for decades.

Read more »