Rock-Solid Returns: Canadian Dividend Stocks That Can Weather Any Storm

These Canadian dividend stocks have a good chance of weathering any storm. One is a better buy than the other today.

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Uncertainties always exist in the financial markets, as security prices are impacted by macro headwinds, news headlines, and risks in the security. Many times, stocks swing too much to the upside or downside without warning. For rock-solid returns, Canadian investors can look to dividend stocks that can weather any storm and black swan.

Here are a couple of dividend stocks with decent dividend yields as examples. Their dividends are sustainable, so you can get reliable returns from their dividends no matter what the stock price does. They have a track record of dividend growth to give you confidence in holding them through thick and thin. They also generate resilient earnings or cash flow to weather any storm.

Brookfield Infrastructure Partners

Brookfield Infrastructure Partners (TSX:BIP.UN) is a global company that owns and operates a diversified portfolio of quality infrastructure assets that help move or store energy, water, freight, passengers, and data.

Over the last 10 years, the top utility stock delivered a compound annual growth rate (CAGR) of about 17.6% — outperforming the Canadian stock market’s 8.6% (using iShares S&P/TSX 60 Index ETF as a proxy) and the utility sector’s 7.6% (using iShares S&P/TSX Capped Utilities Index ETF as a proxy).

The management takes on a value investing approach, improves operations on its acquired assets, and has an ongoing capital-recycling program that sells mature assets and redeploys capital into new investments for better risk-adjusted returns. Overall, it targets funds from operations growth of north of 10% per unit, cash-distribution growth of at least 5%, a payout ratio of 60-70%, and total returns of 12-15%.

At the recent quotation of $47.52 per unit, analysts believe the dividend stock trades at a nice discount of about 20%. It also offers a cash distribution yield of about 4.2%. The utility stock is a good buy here for long-term investment.

National Bank of Canada

National Bank of Canada (TSX:NA) is the sixth-largest Canadian bank. The dividend stock has delivered rock-solid, long-term returns. For example, in the last 10 years, it delivered a CAGR of close to 14.8%, beating the market return by about 6.2% per year! In fact, it has been the best performer among the Big Six Canadian banks. In this period, it beat the runner-up’s returns by about 3.3% per year.

At about $102 per share at writing, National Bank stock is fairly valued at about 10.6 times earnings. Although it’s not a bad time to buy some shares in the stable bank, investors might be able to grab shares at a better bargain on a pullback. After all, a recession is still in the cards, although economists now believe that one could occur later by 2024.

The bank stock also provides a 4% dividend, which is supported by a sustainable payout ratio of about 41% of earnings. Analysts estimate it will be able to grow its earnings per share by about 6.8% per year over the next three to five years, which can lead to a decent rate of return of close to 11% in this period.

Every diversified portfolio should hold some rock-solid dividend stocks like Brookfield Infrastructure Partners and National Bank that can deliver reliable returns.

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 Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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