All the newbie investors are probably looking at the pullback across global stock markets right now as a reason to panic and take all their money out of the markets. However, seasoned contrarian investors know this is as good a time as any to invest heavily in the stock market. Market volatility provides the perfect opportunity to invest as long as you know where to use your money.
Share prices fall across the board during such sell-offs. While many stocks that see downward price corrections only return to reasonable levels, plenty of high-quality stocks enter undervalued territory. Making the most of this chance means identifying stocks with solid fundamentals and the ability to weather the storm and emerge stronger on the other side.
With this backdrop, here are two stocks that would be my top picks on the TSX right now.
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Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is an $88.33 billion market capitalization oil and natural gas giant in the Canadian energy sector. CNQ is one of the largest natural gas and oil producers in western Canada. As of this writing, it trades for $42.05 per share. Down by over 25% from its 52-week high, CNQ stock boasts an inflated 5.59% dividend yield.
Besides an attractive dividend yield, CNQ stock offers plenty of reasons to consider investing in it. The fears of U.S. tariffs will likely cause a slump in oil demand and trigger a recession. The U.S. relies heavily on Canadian oil and natural gas. While the U.S. announced a 10% tariff on Canadian energy products, the tariffs might go away.
The company’s new liquified natural gas (LNG) export facilities, and new east-west oil and gas pipelines will likely reduce Canada’s reliance on the U.S. market. While near-term volatility will likely persist, investors can rest easy with money in the stock, knowing that it has a 25-year streak of dividend growth.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS), also called Scotiabank, is a $63.17 billion market capitalization giant in the Canadian banking sector. It is one of the Big Six Canadian banks. Historically, the Canadian banking sector has been considered a solid industry for long-term investors. The top bank stocks have remarkable track records for capital gains and consistent dividend payouts that span over a century or longer.
As of this writing, Scotiabank stock trades for around $68 per share. Down by almost 15% from its 52-week high, Scotiabank stock boasts an inflated 6.22% dividend yield. The bank’s ongoing transition will focus on creating more revenue from its Canadian and American markets. The bank is reducing its focus on the Latin American market, where it has already spent billions in the last couple of decades.
The trade tensions will likely have a sustained negative impact on share prices, but investors can lock in the higher-yielding dividends and leverage the passive income till the dust settles.
Foolish takeaway
Investing some of your savings in dividend stocks doesn’t automatically mean your money will be safe from the effects of a market crash. It is possible for the value of your investment to decrease in the short term due to falling share prices. However, that might not matter much in the long run.
Even when share prices are declining, dividend stocks continue lining your account balance with cash through quarterly distributions. The trick is to invest in companies capable of sustaining payouts through market downturns. To this end, CNQ stock and BNS stock can be excellent holdings to add to your self-directed portfolio.
