If you are looking for safe dividend stocks with attractive yields, now is the time to be a buyer. The broad TSX stock market has corrected. It is now down nearly 10% for the year. I have not seen investor and media sentiment so low for several years.
Fear can be a contrarian investor’s best friend
The recent correction may present a great opportunity to start swiping up high-quality dividend stocks. As Warren Buffett once said, “A climate of fear is [an investor’s] best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.”
Dividend stocks have pulled back, and yields are elevated. If you aren’t afraid to be a little contrarian and can afford to invest with an extended time horizon (five or more years), there are plenty of great businesses to buy.
Consequently, shrewd investors can lock-in a great combination of dividends and capital growth for the future. If you are looking to buy the correction, here are three dividend stocks I’d consider today.
A great dividend-growth stock
One of my favourite stocks for dividends and dividend growth is Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP). This stock is particularly well suited for the current environment. Over the pandemic, it locked in long-term debt at very low interest rates. Current rate increases should have little short-term impact on its business.
On the inverse, its infrastructure assets (ports, LNG export terminals, railroads, natural gas processing plants, and pipelines) enjoy strong growth from rising volumes and higher prices from inflation. Likewise, around 70% of its contracts have some sort of inflation indexation. All combined, it should enjoy a meaningful boost to cash flows in the coming years.
Brookfield has a long history of growing its dividend by over 9% a year. With the stock down 6% this month, it pays a decent 3.75% dividend. For a combination of defence and growth, this is an ideal dividend stock to own for the long haul.
A dividend stock benefiting from the energy boom
If you are looking for a more elevated dividend yield, you might want to consider Pembina Pipeline (TSX:PPL)(NYSE:PBA). It is one of the largest midstream and pipeline companies in Western Canada. While this stock is up 19.8% in 2022, it is down over 10% in the past month.
Currently, it has a 5.56% dividend yield and pays a monthly dividend worth $0.21 per share. With strong oil prices, Pembina is enjoying a great pricing environment for its processed gas products. Likewise, as energy activity picks up in Canada, it could see volumes increase through its transport network.
Pembina also plans to combine several assets into a joint venture with KKR. The deal is expected to be immediately accretive, and Pembina plans to raise its dividend once completed.
A top blue-chip stock for dividend growth
Another dividend stock to buy at a rare bargain is Canadian National Railway (TSX:CNR)(NYSE:CNI). Its stock is down 7.7% in 2022. Today, it is trading with an elevated dividend yield of 2%, which is above its five-year average of 1.8%. It has grown its dividend by 14.4% annually over the past decade.
CN has a strong competitive moat, an enviable rail network, and great pricing power. CN has produced mid-teens annual returns for years. Any pullback in the stock has been a good time to add to the portfolio.
While CN has faced some weather and supply chain challenges in the first half of 2022, it expects the second half to be much more robust. It has a new CEO focused on maximizing the value of its current assets, and the company may be in the early stages of an operational and financial turnaround.