2 Stocks I Own and Will Buy More of if the Stock Market Crashes

Investors should buy solid stocks that have staying power. They should also have confidence to buy more in market crashes.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

Market corrections will occur from time to time. The greater the correction, the rarer it is. Market crashes that happen in a flash are most likely triggered by some macro event that isn’t a company-specific problem. Nonetheless, these events do affect company profits at least in the near term. Investors should consider owning businesses and stocks that have staying power and that they are willing and confident enough to buy more of in market crashes.

Here are a couple of dividend stocks I own and will buy more of if the stock market crashes.

TELUS stock

Big Canadian telecom stocks tend to have lower volatility to the market. TELUS (TSX:T)(NYSE:TU) stock appears to have a higher growth profile over the next few years versus its Canadian telecom peers. For instance, TELUS spun off TELUS International last year, but it still holds a large stake in the IT services outsourcing and consulting business. TELUS International helped TELUS double its revenue from 2019, which is a significant outperform versus its peers that, at best, saw 6% growth.

Because it generates stable business results through economic cycles, investors can sit on the resilient shares and enjoy safe and growing dividend income. Its recent payout ratio is about 61% of its earnings. At its recent quotation, the telecom stock provides a nice yield of 4.7%.

According to the analyst consensus 12-month price target, the dividend stock’s valuation is discounted by about 16% at $28.77 per share. It’s a good time to pick up some shares, but if it falls lower on a market-wide selloff, it would be an even stronger buy.

Another great source of safe and growing dividend income is a big Canadian bank stock.

BMO stock

It’s a no-brainer for investors to buy the Big Six Canadian bank stocks on market corrections. Keep in mind that they are somewhat sensitive to economic cycles. In recessions, their earnings would fall. However, it’s critical to point out that they remained profitable during the last two recessions and continued paying safe dividends. In other words, the regulated big banks have staying power and enjoy an oligopoly environment, as they hold most of the country’s banking deposits.

Notably, in prolonged recessions, federally regulated Bank of Montreal (TSX:BMO)(NYSE:BMO) and its peers may be restricted from share repurchases and raising dividends. In the last recession triggered by the COVID-19 pandemic, BMO’s adjusted earnings per share dropped by 18%, and it kept its dividend the same for eight consecutive quarters due to regulations, but it managed to maintain dividend growth on an annual basis because of the timing of the dividend hikes before and after the dividend freeze.

Regardless, the big Canadian bank stocks, including BMO stock, have delivered stable long-term returns thanks partly to paying decent yields from their dividends. In market crashes, BMO stock’s price drops and its dividend yield rises. So, it makes good sense for long-term investors to buy more BMO shares when prices fall lower.

According to the analyst consensus 12-month price target, the dividend stock’s valuation is discounted by about 15% at $126.76 per share. It also provides a decent yield of 4.4%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has positions in Bank of Montreal and TELUS CORPORATION. The Motley Fool recommends TELUS CORPORATION and TELUS International (Cda) Inc. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »