There’s no question that some of the best stocks to buy and hold for the long haul are high-quality companies that pay a significant and consistently growing dividend.
When companies pay a dividend, it helps to reduce some risk from the investment. Rather than the company taking all their earnings and reinvesting them in growth in hopes of more returns down the road, some of those profits are returned to investors immediately.
In addition to reducing some of the risk of the investment by returning earnings to you today, earning dividends can also help you earn returns when capital gains are much harder to achieve, such as when the market is flat or falling.
That’s why dividend stocks are some of the best investments to make in this uncertain economic environment. Not only are some of the safest and most resilient stocks on the market dividend stocks but with an uncertain market environment and higher-than-normal inflation in recent years, dividend growth stocks are essential to help you outpace the rapid increase in the cost of living.
So, with that in mind, if you’re looking for high-quality dividend stocks to add to your portfolio today, here are two of the best on the TSX.
One of the best dividend growth stocks in Canada
If you’re looking for safe and reliable stocks that can earn you a consistent dividend and help you outpace inflation, there’s no question that Fortis (TSX:FTS), the massive utility stock, is one of the best companies to consider.
As a utility stock with well-diversified operations, Fortis is one of the most reliable and recession-resistant stocks on the market. It not only offers services that are highly essential, but it’s consistently investing in expanding its operations, which in turn leads to consistent growth in its earnings.
To get a better understanding of just how impressive Fortis is, investors only need to look at its track record. It has the second-longest dividend growth streak in Canada at an unbelievable 50 straight years.
Over the last five years, that dividend has grown at a compounded annual growth rate (CAGR) of 5.6%, well above the normal rate of inflation, which is roughly 2%. Furthermore, Fortis is targeting 4% to 6% annual increases to the dividend through 2028.
Plus, although Fortis is known as a high-quality dividend stock, and rightfully so, it also provides investors slow, but steady capital gains growth.
In fact, if you factor in the dividends, over the last decade, investors in Fortis have earned a total return of more than 150%, or a CAGR of roughly 9.7%, well above the pace of inflation, even when it was surging.
So if you’re worried about the impact inflation can have on your capital, there’s no question a high-quality stock like Fortis, and its current yield of roughly 4.2%, is one of the best investments you can buy today and plan to hold for years.
One of the top green energy stocks to buy and hold long term
In addition to Fortis, another excellent dividend growth stock to buy and hold long-term is Brookfield Renewable Partners (TSX:BEP.UN).
Brookfield is an ideal stock to buy because it’s one of the most dominant companies in an industry with decades of growth ahead of it.
For years, Brookfield has built an impressive global portfolio of well-diversified green energy assets that can both increase in value and generate attractive cash flow, which enables Brookfield to invest in new growth and distribute higher returns to investors.
That’s what makes Brookfield Renewables such an ideal dividend stock to buy in order to outpace inflation.
Not only does it target a 5% to 9% increase in its distribution every single year, well ahead of the long-term pace of inflation, but over the last decade, with distributions factored in, it has earned investors a total return of more than 270%. That’s a CAGR of just over 14%. Today, with Brookfield trading just over 10% off its 52-week high, it offers investors a yield of roughly 5.3%.
So if you’ve got cash to invest and are looking for high-quality, long-term investments that can both outpace inflation and earn you an attractive return, it’s essential to find reliable and consistently growing dividend stocks such as Fortis or Brookfield Renewable Partners.
