The S&P/TSX Composite Index rose 15 points to close out the previous week on Friday, April 14. That closed the book on what has been a strong start to the first full month of the spring season. However, fears of a recession have investors spooked that they are on shaky ground. May is fast approaching, which could spell trouble, as investors old and new may think on the oft-repeated adage: sell in May and go away. This may be a tough environment for beginners.
Today, I want to zero in on two dividend stocks that can offer security and peace of mind in this market. Let’s jump in.
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Why top bank stocks are perfect for a beginner portfolio
Bank of Montreal (TSX: BMO) is the third largest of the Big Six Canadian banks, behind Royal Bank and TD Bank. Like TD Bank, BMO also boasts one of the largest United States banking footprints compared to its peers. Shares of this bank stock have dropped 2.3% in 2023 as of close on April 14. The dividend stock has plunged 14% year over year.
Canadian bank stocks have encountered turbulence since the Bank of Canada (BoC) elected to pursue its aggressive interest rate-tightening policy to combat soaring inflation. Interest rate hikes have taken their toll on loan growth and the Canada housing market. However, Canada’s top banks will also benefit from improved profit margins that come with higher interest rates.
This bank released its first-quarter (Q1) fiscal 2023 earnings on February 28. BMO put together a strong start to the year, but the stock performed poorly in the aftermath of the earnings release. Canadian Personal and Commercial (P&C) Banking adjusted net income fell 2% year over year to $980 million in Q1 2023. However, BMO’s United States P&C Banking segment delivered adjusted net income growth of 3% to $698 million.
Shares of this dividend stock currently possess a very favourable price-to-earnings (P/E) ratio of 7.6. Moreover, BMO offers a quarterly dividend of $1.43 per share. That represents a very solid 4.7% yield. Beginners can count on BMO as a profit machine that will deliver consistent capital growth and income for the long haul.
Beginners can sleep soundly if they buy this future Dividend King
Fortis (TSX: FTS) is another highly dependable dividend stock that beginners should not ignore in the spring of 2023. Indeed, this is an elite option for investors who desire predictability above all. This St. John’s-based utility holding company has seen its stock increase 7.1% so far in 2023. Its shares are down 6.7% year over year.
Investors got to see Fortis’s final batch of fiscal 2022 results on February 10, 2023. The company delivered adjusted net earnings per common share of $2.78 for the full year — up from $2.59 in fiscal 2021. Meanwhile, it drove ahead with a whopping $4.0 billion in capital expenditures, which powered rate base growth above 7%. This should pique the interest of beginners.
The company has already laid out an ambitious five-year capital plan from 2023 through 2027 that will total $22.3 billion. This includes a $5.9 billion investment in clean energy. The plan is expected to power compound annual rate base growth of 6.2% over the forecast period, vaulting its rate base from $34.1 billion in 2022 to $46.1 billion in 2027. This, in turn, will drive income to support a dividend-growth rate of 4-6% over this same stretch.
A Dividend King is a dividend stock that has delivered 50 consecutive years of annual income growth. So far, only Canadian Utilities has entered this elite club on the TSX. Fortis currently offers a quarterly dividend of $0.565 per share, which represents a 3.8% yield. It has achieved 49 straight years of dividend growth. That means Fortis is one year away from snatching that crown. Beginners should look to own this future dividend royalty in 2023.
