1 Top Dividend Stock That Can Handle Any Kind of Market (Even Corrections)

While most dividend aristocrats can maintain their payouts during weak markets, very few can maintain a healthy valuation or bounce back quickly enough to minimize losses.

| More on:
grow money, wealth build

Image source: Getty Images

Choosing a dividend stock that can withstand weak markets and adverse market conditions like crashes, slumps, and corrections is relatively easy. Aristocrats with long histories of dividend growth through weak markets are a safe bet, as they tend to maintain and even grow their payouts despite market conditions.

However, it can be challenging to choose a stock that may not just maintain its dividends but also have a relatively healthy valuation. No stock may be safe from a market-wide or sector-wide dip, but we can limit ourselves to dividend stocks that can make for a timely or quicker-than-market recovery during a bear market phase. One stock that fits the bill on both fronts is Fortis (TSX:FTS).

Factors behind Fortis’ resilience

The primary factor influencing Fortis’s resilience in weak markets is its business – utilities. Even though utility businesses are cost-intensive because they rely on expensive infrastructure to develop and maintain, they also tend to be financially healthy because most of their revenues rely upon utility bills, which are treated as one of the most necessary expenses in most households.

Fortis has enhanced these strengths with a geographically diversified business, offering electricity and natural gas utilities to about 3.5 million consumers in 10 different markets. The company has assets worth about $66 billion, and 99% of them are tied to regulated utility assets, adding another layer of safety to its revenues.

Performance and dividends

Fortis is easily among the safest and most revered picks when it comes to dividends. This stems not only from its business model and financial strengths but also from its stellar dividend history. The company has been growing its payouts for about 49 consecutive years, the second longest dividend growth streak in Canada, and just one year away from becoming Canada’s second dividend king.

The dividend growth is not just cosmetic. Between 2014 and 2024, the company has grown its payouts by about 84%. This is more than enough to ensure that your dividend-based passive income remains ahead of inflation.

The stock performance is not nearly as illustrious, but it’s still quite decent. The stock rose by about 59% in the last 10 years. It experienced a relatively swift recovery after the 2020 market crash and hasn’t sunken too harshly in market-wide corrections in the past. It’s currently discounted right now, which has made its valuation attractive and beefed up its yield to 4.6%.

Foolish takeaway

Fortis is easily one of the top dividend stocks currently trading in Canada, offering a healthy combination of dividends and capital appreciation (at least preservation) potential. You can trust the stock to maintain a healthy stream of dividends in almost any kind of market, making it perfect for bullet-proof passive income development.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

2 REITs to Buy to Earn Like a Lazy Landlord

Becoming a landlord and managing the property yourself may give you the most direct exposure, but it also comes with…

Read more »

money cash dividends
Dividend Stocks

Beat the TSX Immediately With This Cash-Gushing Dividend Stock

This dividend stock has already beat the TSX today, even from 52-week lows. But it could only be the beginning.

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

This 8% Dividend Stock Pays Cash Every Month

Earn monthly cash of $154 with this 8% dividend stock.

Read more »

oil tank at night
Dividend Stocks

Think Oil Is Going Higher? 3 Dividend Stocks to Buy Now

Looking for steady dividend growth? These three Canadian oil stocks could provide substantial dividend income in the coming years.

Read more »

Profit dial turned up to maximum
Dividend Stocks

This 7% Dividend Stock on the TSX is Worth Watching

With this superb TSX stock now trading at the bottom of its 52-week range, it's certainly a dividend stock you'll…

Read more »

Dots over the earth connecting the world
Dividend Stocks

1 Magnificent Dividend Stock Down 23% to Buy Right Now Near a Once-in-a-Decade Valuation

Patient investors could be happy with this dividend stock a few years down the road.

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 TSX Dividend Stocks to Buy While They Still Offer Great Yields

These top dividend-growth stocks now offer 7% dividend yields.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Best Stocks to Buy in May 2024: TSX Real Estate Sector

Besides yielding stable monthly passive income, these top TSX real estate stocks could help you earn high returns on your…

Read more »