2 Safe Dividend Stocks for Canadians to Beat Inflation

Investors who missed the bounce off the 12-month lows are looking for steady TSX dividend-growth stocks that can still offer attractive returns.

| More on:

Inflation is down considerably in the past year and appears headed to the 2% target set by the Bank of Canada. As a result, additional cuts to interest rates are expected in the coming months and through 2025. This should provide an extra tailwind for dividend stocks that are already moving higher.

Investors who missed the bounce off the 12-month lows are looking for steady TSX dividend-growth stocks that can still offer attractive returns.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) trades near $71 per share compared to $93 at one point in early 2022. The stock is off the 12-month low of around $55, but still offers investors a 6% dividend yield at the time of writing.

Bank of Nova Scotia’s fiscal third-quarter (Q3) 2024 results showed that borrowers carrying high levels of debt are struggling to cover the jump in interest costs caused by the hikes to interest rates that occurred in 2022 and 2023.

In the past few months, however, the Bank of Canada has trimmed interest rates by 0.75%. More cuts are expected through next year as the central bank tries to avoid pushing the economy into a recession. Bank of Nova Scotia’s provisions for credit losses (PCL) should stabilize and then start to decline in the next few quarters. If unemployment stays near current levels or only rises modestly, there could even be PCL reversals late next year or in 2026. This would provide a nice boost to profits and could free up more cash for dividends.

Fortis

Fortis (TSX:FTS) raised its dividend in each of the past 50 years and is targeting annual dividend growth of 4-6% through at least 2028. This is the kind of stability investors should look for when choosing dividend stocks that should hold up well during a recession.

Fortis operates $69 billion in utility assets across Canada, the United States, and the Caribbean. The businesses include power generation facilities, electricity transmission networks, and natural gas distribution utilities. Revenue is rate-regulated, meaning cash flow tends to be predictable and reliable.

Fortis is working on a $25 billion capital program that will boost the rate base from $37 billion in 2023 to more than $49 billion in 2028. The resulting jump in cash flow should support the planned dividend growth.

Investors who buy FTS stock at the current level can get a dividend yield of 3.8%.

The bottom line on dividend stocks

Bank of Nova Scotia and Fortis pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio targeting passive income, these stocks deserve to be on your radar.

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.

The Motley Fool recommends Bank Of Nova Scotia and Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Buy These Canadian Dividend Stocks for Safe Monthly Income

Do you want to earn some steady monthly income? These three REITs are a good bet if you want safe,…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Got $7,000? 4 Quality Stocks to Buy and Hold Forever in a TFSA

These four Canadian stocks are some of the best businesses you can buy, making them ideal long-term investments for your…

Read more »

Piggy bank and Canadian coins
Dividend Stocks

How to Use Your TFSA to Earn $227 Per Month in Tax-Free Income

These TSX dividend stocks offer high yields and monthly payouts. These stocks can help you earn over $227 in tax-free…

Read more »

man shops in a drugstore
Dividend Stocks

Got $3,500? 5 Consumer Stocks to Buy and Hold Forever

Five consumer staple stocks are suitable long-term holdings for their defensive qualities.

Read more »

coins jump into piggy bank
Dividend Stocks

Don’t Watch Your Savings Shrink: 2 Dividend Stocks to Help Pay the Bills

Canadians can protect their savings by investing in high-quality dividend stocks that pay out "sufficient high" but safe dividends.

Read more »

dividends can compound over time
Dividend Stocks

TFSA: 4 Canadian Stocks to Buy and Hold Forever

These four top TFSA stocks not only pay dividends but also offer strong long-term upside potential.

Read more »

Hourglass and stock price chart
Dividend Stocks

Outlook for Nutrien Stock in 2025

Nutrien stock has gone through a rough patch, but that could mean there is value to be found.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

2 Affordable TSX Stocks That Pay Monthly Dividends

Two affordable, high-yield TSX stocks pay consistent monthly dividends.

Read more »