The events that rocked the stock market in recent years show that volatility never leaves the stock market. Only factors that drive it change every year. In 2020, the COVID-19 breakout and oil price war caused widespread selloffs, especially in energy stocks. The TSX lost more than 8% in 2023 due to persistent inflation and aggressive rate hikes by the Bank of Canada.
Established dividend payers slash or suspend dividend payments to preserve cash and protect the balance sheet. For some investors, the tendency is to exit during a market pullback. However, people saving for retirement, relying on dividends for sustenance, or needing extra income have a way of staying the course.
If you have $7,000 to invest, you can build a passive-income portfolio, provided you bulletproof it. Bulletproofing a passive-income portfolio means ensuring your stock holdings can weather market storms and survive downturns.
TELUS (TSX:T) and Enghouse Systems (TSX:ENGH) are ideal for risk-averse and long-term investors. Besides their Dividend Aristocrat status, their businesses should thrive for years, notwithstanding market volatility.
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Dividend-growth program
Passive-income investors should have no reservations about making TELUS an anchor stock in their portfolios. Canada’s second-largest telco has an impressive dividend-growth streak of 19 years. At $23.38 per share, the 5G stock pays a juicy 6.43% dividend.
In May 2022, the $34 billion company announced a 7-10% annual dividend increase target from 2023 to year-end 2025 on a semi-annual dividend basis. Its long-term dividend-payout ratio guideline is 60% to 75% of free cash flow. TELUS established a dividend growth program in 2021 that has been extended several times and continues. The program is now in its 13th year.
TELUS has expanded beyond the communications services industry and has transformed into a global technology company. Telecom is still the core business, although revenue generation is broader than just the world-leading networks. There’s TELUS International in the software infrastructure industry, TELUS Agriculture, and TELUS Health.
With TELUS is running full steam, management can execute its growth strategy on a global scale. Its president and chief executive officer, Darren Entwistle, said TELUS commits to driving meaningful and sustainable free cash flow growth and unlocking transformational benefits for all stakeholders.
Earn two ways
The technology sector ruled the TSX in 2023, and tech stocks could repeat and deliver explosive returns in 2024. Enghouse Systems is a buying opportunity and a rare gem. This $1.98 billion software and services company provides enterprise software solutions in various and distinct vertical markets.
Now is the best time to buy the stock after a productive year. In fiscal 2023 (12 months ending Oct. 31, 2023), revenue rose 6.2% to $454 million versus fiscal 2022. While net income declined 23.5% year over year to $72.25 million, cash reserves reached $240.4 million at year-end.
Since Enghouse has zero external debt, it can pursue growth opportunities and strategically deploy cash reserves. Prospective investors can earn two ways from ENGH: price appreciation and quarterly dividends. At $35.88 per share, the dividend yield is a decent 2.45%.
Bulletproof vest
TELUS and Enghouse Systems don’t pay the highest dividends, but their growth records speak volumes. As your first and second liner, the stocks can be your passive-income portfolio’s bulletproof vest.
