In the last few weeks, recession rhetoric has picked up steam along with discussions of moving to safer investment options. Indeed, defensive dividend stocks outperform growth stocks and even the broader markets during bear markets. So, if you’re a conservative investor, these top Canadian dividend stocks will likely interest you.
Enbridge
In the last decade, Canadian markets at large have returned 60%, while midstream energy giant Enbridge (TSX:ENB)(NYSE:ENB) has returned 130%, including dividends. Certainly, Enbridge’s return falls short when we compare it with some top growth stocks. However, considering its less volatile nature and stable dividends, ENB stock is one of the classic defensive bets for conservative investors.
Enbridge will likely continue to grow steadily in the future as well, mainly driven by its stable and predictable earnings. Note that even if it operates in the risky energy sector, Enbridge’s earnings are not significantly determined by oil and gas prices. Instead, they are derived from long-term contracts with investment-grade counterparties.
It operates a strong asset base that transports 25% of North America’s oil and 20% of the gas that the U.S. consumes. This sizeable scale and unmatchable pipeline network enable stable cash flows and, ultimately, stable dividends. It has increased shareholder payouts for the last 27 consecutive years. Furthermore, ENB stock yields a handsome 6.4%, one of the highest among Canadian bigwigs.
Fortis
Another company that facilitates stable earnings and dividends is Fortis (TSX:FTS)(NYSE:FTS). This top Canadian utility company has a long-standing dividend payment history that indicates stability and reliability. Fortis has increased shareholder dividends in the last 48 consecutive years and currently yields a decent 3.5%.
What sets Fortis apart from other stocks is its resilience in economic downturns. Utility companies like Fortis keep growing steadily whether we’re in a recession or an economic boom. So, Fortis shareholders continued to received consistently higher dividends even during the pandemic and the 2008 financial meltdown.
Fortis is focused on long-term, profitable growth and is embarking on a $4.0 billion annual capital plan. It’s also partaking in the clean energy transition and has future plans for its assets to focus more on energy delivery and renewable, carbon-free generation.
FTS stock has gained a mere 3% in the last 12 months. But it has returned 160% in the last decade, including dividends. So, you might need a little extra patience with stocks like Fortis. Its regularly growing dividends form a large part of its handsome total returns in the long-term.
BCE
Like utilities, telecom companies also enjoy stable earnings that facilitate steady shareholder dividends. Canada’s biggest telecom company BCE (TSX:BCE)(NYSE:BCE) is one such recession-resilient pick. It pays stable dividends that yield a juicy 6.4%.
BCE has spent billions of dollars in network improvements and the 5G rollout over the last few years, the highest among the three-player-dominated Canadian telecom space. It will likely see superior financial growth in the next few years, enabling higher shareholder dividends. BCE stock has returned 140% in the last decade, notably beating broader markets.
Because of their predictable earnings, these three TSX stocks will likely outperform in an economic downturn. Note that defensives like these can still trade weakly when the macro headwinds hit. But their drawdowns will be relatively lower compared to broader markets. Furthermore, their regular dividends can compensate for capital losses to some extent.
