As 2023 comes closer and closer to its end, the economic rollercoaster in Canada does not seem like it will let up soon. As of this writing, the S&P/TSX Composite Index is down by 3.51% from its 52-week high. The weakness in the Canadian benchmark index reflects the volatility in the overall stock market.
With inflation persisting, despite the high interest rate hikes, Canadians better prepare for another several quarters of market volatility.
For a stock market investor, a harsh economic environment can be detrimental due to share price declines. However, savvier investors can use these downturns as an opportunity to invest in dividend stocks trading at discounted prices.
Dividend investing to weather the market
Investing in dividend stocks can be an excellent way to continue generating returns during uncertain market conditions. Even when share prices are down, investors can see their account balances grow through distributions from dividend-paying companies they own shares of. During market downturns, Canadians can capitalize on higher-than-usual-yielding dividends.
Due to a decline in share prices, the dividend yields of dividend stocks become inflated, making them appear more attractive than usual. However, it would be unwise to pick any high-yielding dividend stock to leverage the market volatility for dividend income.
To successfully use dividend investing in your favour during harsh market conditions, you must identify and invest in dividend stocks that can offer returns over the long run. To this end, I have identified two top dividend stocks from a defensive industry you can consider for your self-directed portfolio.
BCE
BCE (TSX:BCE) is the $49.20 billion market capitalization leader in the Canadian telecom industry. Telecom companies like BCE enjoy healthy cash flows due to their recurring revenue streams. During uncertain periods and economic downturns, the demand for telecom services does not decline.
Even when cutting discretionary expenses, consumers need internet connectivity and information, making BCE a vital business.
BCE is also the leading 5G provider in the country. It is investing a lot to expand its 5G, 5G+, and broadband internet infrastructure to drive its customer growth and boost financials.
The high-interest-rate environment has weighed heavily on BCE stock due to its reliance on taking on debt to fund capital programs. However, these efforts can boost cash flows and cut costs in the future, driving its growth and growing shareholder value.
As of this writing, BCE stock trades for $53.93 per share and pays its shareholders at a juicy 7.18% dividend yield that you can lock in right now.
Telus
Telus (TSX:T) might not be the largest telco on the block, but the $35.05 billion market capitalization company is a mainstay in the industry.
Just like the rest of the economy and the telecom industry, Telus stock has also been suffering from the growing weight of the economic pressure. Until inflation retreats, it might be difficult to see a meteoric rise in share prices for the telecom giant.
However, Telus is a well-capitalized company. Generating most of its revenue through its core mobile and internet services businesses, Telus looks well positioned to weather the ongoing storm and come out stronger on the other side.
As of this writing, Telus stock trades for $24.10 per share and boasts a 6.03% dividend yield. While not as high-yielding as BCE stock, Telus stock can be an excellent investment to earn dividend income in your self-directed portfolio.
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Foolish takeaway
Dividend investing can be an excellent way to achieve various short- and long-term financial goals. Whether you want to build a retirement nest egg through the power of compounding or generate a passive income, creating a well-balanced portfolio with dividend stocks can help you do it. To this end, BCE stock and Telus stock can be excellent investments to buy and hold.
