Worried About the Market? 2 Dividend Stocks That Let You Sleep at Night

Conservative investors should consider Royal Bank of Canada and Fortis stocks in their portfolios. Currently, RBC appears to be a better buy.

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Nowadays, it seems there’s always something to worry about in the market. The latest news is that the banking shakeup has hit San Francisco-based regional bank First Republic Bank (NYSE:FRC).

The bank stock has lost more than 94% of its value in the last 12 months! Apparently, its first-quarter results reported its customer deposits dropped 41% to US$104.5 billion. It is another classic example of a bank run as “wealthy customers and businesses yanked their money from firms over worries that rising interest rates were eroding the value of their assets,” as reported in a Bloomberg article.

Canadian investors do not need to be overly worried, though. The big Canadian banks are more diversified and have core businesses in a well-regulated Canadian market. So, the first dividend stock that can let you sleep well at night is Royal Bank of Canada (TSX:RY).

RBC stock

At writing, First Republic stock is down about 45% intraday, but Royal Bank stock is only down past 1%. The banking shakeup is providing an opportunity for investors to pick up Canadian bank stocks that are potentially on sale.

As expected, RBC stock has stayed resilient, even when compared to its big Canadian bank peers. Here’s an illustration of the last-12-month price change of RBC stock versus BMO Equal Weight Banks Index ETF (TSX:ZEB) as an industry proxy.

RY Chart

RY data by YCharts

RBC is a diversified bank with operations in personal and commercial banking (40% of fiscal 2022 revenue), wealth management (30%), capital markets (18%), insurance (7%), and investor and treasury services (4%). Particularly, it has leading positions in its Canadian retail banking products. It also focuses its operations geographically in Canada (59% of revenue) and the United States (25%).

At $131.65 per share at writing, RBC stock appears to be fairly valued and offers a safe dividend yield of 4%. The blue-chip stock has the potential to deliver total returns of about 12% per year over the next five years.

The other big Canadian bank stocks are good buys, too, for long-term investing. However, you don’t want to put all your eggs in one basket (or one industry). To step further away from the banking shakeup, you might consider the next defensive dividend stock: Fortis (TSX:FTS).

Fortis stock

You could even call it a flight to quality, as there’s an increasing fear of a recession occurring this year in Canada and the United States. Particularly, Fortis stock has rebounded nicely by more than 20% from the low in late 2022.

What’s so quality about Fortis? About 93% of its assets are for transmission and distribution of energy, which are essential services to the economy. It serves 3.4 million electric and gas customers. The regulated utility is also diversified across 10 businesses in Canada, the U.S., and the Caribbean.

Importantly, the utility stock is one of the top dividend stocks in Canada with 49 consecutive years of dividend growth. Its 10-year dividend-growth rate is 6.1%.

It’s a predictably growing business. Through 2027, it has a low-risk $22.3 billion capital plan to continue growing its rate base at about 6.2% per year, which can drive dividend growth of 4-6% in the period.

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 no positions in any stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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