When buying dividend stocks, investors gain exposure to companies that return capital to shareholders. In order to do so, such companies need to be on solid financial footing. Thus, dividend-paying stocks tend to be much more financially stable than other unprofitable companies in higher-growth sectors.
Now, on the capital-appreciation front, investors may not gain as much. But for those looking for defensiveness and stability in times like now, such dividend stocks may be the way to go.
The issue is, there are thousands of such stocks to choose from. However, among the top TSX dividend stocks out there, I have a couple picks I think will outperform long term.
Let’s dive in to two stocks I’d be putting $400 to work with right now.
Top dividend stocks to buy: Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is one of the largest banks in Canada. Apart from commercial and personal banking services, this mega bank also provides wealth management, investment, insurance services, etc., on an international scale.
Now, with the recent banking crisis in the U.S., investors would be remiss to ignore the risks in the banking sector. Royal Bank is a bank like any other, and the cracks seen in the U.S. banking sector are noteworthy and ought to be considered.
That said, there’s a reason why Royal Bank’s stock chart looks like it does. This stock did take a dip following the recent news. However, it’s already made back much of its recent decline. That’s because, as a globally, systemically important bank, Royal Bank is likely to actually see fund inflows from this mess. Thus, other banks’ losses could be Royal Bank’s gain.
The company’s financials remain robust, with strong earnings growth supporting a recent 8.8% dividend increase. Currently, RY stock yields 4%, which is rather attractive when factored into its long-term growth trajectory.
Over the long term, Royal Bank has proven to be among the most stable dividend-paying banks out there. This is a stock I think investors looking to put some fresh capital to work can’t go wrong with.
Enbridge
Enbridge (TSX:ENB) is an energy infrastructure organization that has markets in Canada and the United States of America. Apart from crude oil, it also deals in natural gas and other sustainable energy sources like solar, wind, geothermal energy, etc.
This company’s stock price has held very steady over the past year. Indeed, as a key energy infrastructure company, oil prices don’t really affect its underlying business. That’s because Enbridge generally signs longer-term capacity agreements with its counterparties.
However, higher oil prices does reduce counterparty risk for the company. Thus, the stability of its cash flows is improved, as is its dividend visibility.
One of the reasons I like Enbridge stock is its dividend. Currently yielding 6.7%, ENB stock is among the safest high-yield stocks out there. I see this company’s yield declining over time (stock price rising), as investors assign greater value to dividend stability. Additionally, the company is making solid progress on reducing debt and improving its balance sheet. These strategic moves should pay off considerably over time.
