According to the Canadian stock market benchmark iShares S&P/TSX 60 Index ETF, the market is about 7% below the 2022 peak. Some investors worry about market corrections, but it’s precisely during corrections that it could be a good time to invest in stocks for the long term.
For more reliable returns, you can consider solid dividend stocks that pay dependable dividends. Ideally, you would want stocks with decent dividend yields that are trading at good valuations. This way, you have a better chance of getting satisfying long-term returns. Here are some of the top dividend stocks you can consider now.
Empire
Although Empire (TSX: EMP.A) stock doesn’t offer a big dividend, it should be a defensive name in a market correction, especially at the current valuation. It operates grocery stores across all provinces in the country. Its network consists of over 1,500 retail stores and 350 retail fuel locations.
At $35.03 per share, it trades at about 12.3 times adjusted earnings, which is a discount from its peers. At writing, it also offers a dividend yield of close to 2.1% — a dividend that’s well supported by its earnings. Its recent payout ratio was about 24%. If it’s able to grow at a solid rate over the next three to five years, it has a good chance of delivering double-digit returns for investors.
At this quotation, analysts think the stock trades at a discount of approximately 15%, which could lead to near-term upside of about 18%. Notably, Empire has a track record of dividend growth. Its 20-year dividend-growth rate is approximately 9.4%.
RBC stock
To more than double the dividend income, you can turn to leading Canadian bank, Royal Bank of Canada (TSX: RY) stock. At $121.24 per share at writing, RBC stock offers a dividend yield of close to 4.5%. Its dividend is sustainable from its resilient earnings generated from a diversified business, including operations in personal and commercial banking, wealth management, capital markets, and insurance. Its core businesses are in North America, generating about 84% of its revenues in Canada and the United States. Specifically, its trailing 12-month payout ratio is 49% of net income.
In the past 10 fiscal years, RBC increased its adjusted earnings per share (EPS) at a compound annual growth rate of close to 8.5%. Assuming no valuation expansion and a more conservative adjusted earnings-per-share growth rate of 6%, investors can approximate long-term total returns of north of 10% from the blue-chip stock.
The bank will be reporting its quarterly earnings this week. So, it could experience increased volatility in this sensitive time.
Emera stock
For even more dividend income, investors can consider this North American utility stock. Regulated utility Emera (TSX: EMA) stock has declined about 14% from May. This meaningful dip pushed its dividend yield up to about 5.4%. Let’s not forget that it has a dividend increase of likely about 4% that’s coming up next month, which would make its forward dividend yield close to 5.7%.
From 2023 to 2025, Emera has a capital plan of about $8.5 billion that can help it grow its rate base. At $50.73 per share, the analyst 12-month consensus price target represents a discount of about 14% in the stock. This implies near-term upside potential of north of 16% is possible.
