The S&P/TSX Composite Index, Canada’s main stock market performance gauge, fell 2.1% in Thursday’s trading, as investors positioned for further interest rate hikes following a higher-than-expected inflation reading of 4% for August. Nevertheless, investor sentiment gyrates, and the market was up to a positive start on Friday morning with a 0.3% gain. Basically, short-term market moves should not detract investors’ focus away from their long-term retirement savings and investment plan commitments.
Looking at the bigger picture, market volatility in September 2023 will be a long-forgotten memory a decade from now. It’s advisable that individual investors stick to their retirement investment plans religiously and keep committing new capital to their portfolios. Two TSX dividend stocks, namely Canadian Natural Resources (TSX:CNQ) and CT Real Estate Investment Trust (TSX:CRT.UN), or CT REIT, could be best buys for your small, regular or even a lumpsum investment right now.
Why buy CT REIT?
Real estate portfolios have historically offered good inflation protection over extended periods of time, and Canadian real estate investment trusts (REITs) are designed to offer the easiest, stress-free investment access to real estate portfolios managed by professionals.
CT REIT has one of the most occupied real estate portfolios (with 99% occupancy levels), has low leverage (meaning a manageable debt risk profile) and pays a growing monthly dividends (income distributions) that currently yield 6.2% annually.
The trust has engineered strong growth in net operating income and distributable income over the past decade. Its adjusted funds from operations (AFFO) per unit recently increased by 7.6% year over year during the second quarter of 2023. The REIT has room to keep raising its monthly distributions given an AFFO payout rate of 71.4% during the past quarter.
A new investment in CT REIT units today could earn a stable 6.2% “minimum” annual return from the dividend, boost your portfolio’s passive-income-generating capacity, and allow you to participate in the recovery of the Canadian property market in the future.
Buy Canadian Natural Resources stock
Canadian Natural Resources is a $90.5 billion oil and gas stock that should offer investors the best upside in a hot energy market given its low-decline assets, an industry-leading reserve life of 32 years, a commitment to dividend growth, and a shareholder-friendly capital return policy.
Oil prices need to cooperate for CNQ stock to offer substantial returns, and it appears that an oil super-cycle currently underway could have strong legs to run on, as geopolitical tensions persist and continue to disrupt markets, while oil demand holds strong despite electric vehicles (EV) increasingly entering the market.
Canadian Natural Resources stock pays a quarterly dividend that currently yields 4.3% annually. It has raised its annual payout for 23 consecutive years now, and management is committed to boosting shareholder returns by repurchasing the company’s common stock from the market.
The Canadian energy stock could enter a new phase of vastly distributing its free cash flow to shareholders as soon as it achieves its revised $10 billion net-debt goal — a key target that triggers 100% payouts of free cash flow to shareholders through share repurchases and dividend raises. Net debt was $12 billion by June this year.
The company recently generated $2.7 billion in cash flow during the past quarter. Strong oil prices into the fourth quarter could accelerate the time to “return windfalls” on CNQ stock.
Investor takeaway
A $1,000 monthly investment into a stock position that returns 7% per annum could grow to more than $511,000 in 20 years. The two stocks above have what it takes to generate desired returns through growing dividends and steady share price growth in the future.
