Last week, the market had its worst week since the initial days of the pandemic. With markets across the world down by double digits, investors are now on the hunt for safety stocks that can be long-term holdings.
Fortunately, some quality Canadian stocks fit that criteria as long-term holdings. If I had $25,000 to drop into those quality stocks, here’s where I would invest and why.
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Start defensively with some income
The first stock I would consider as part of a portfolio with long-term holdings is Fortis (TSX: FTS). Utility stocks like Fortis are among the most defensive stocks on the market, and for good reason.
Utilities generate a recurring revenue stream that is both predictable and growing. That revenue is backed by long-term, regulated contracts, which allow Fortis to reinvest that revenue into growth and provide a generous dividend.
As of the time of writing, Fortis offers a 3.74% yield, making it a solid option for investors. Adding to that appeal is the fact that Fortis has provided annual increases to that dividend for over 50 consecutive years.
This means that a $25,000 investment will generate an income of just over $930. For investors not ready to draw on that income yet, that dividend can be reinvested, allowing it to grow further.
Fortis also has plans to continue that annual cadence, making this a solid stock for any investor seeking long-term holdings.
Add a bank stock with a solid history
Compiling a list of the best long-term holdings for investors to buy would be impossible without mentioning one of Canada’s big banks. The big bank for investors to look at right now is Canadian Imperial Bank of Commerce (TSX: CM).
CIBC is one of the smallest of the big banks, but it still packs a big punch. The bank has a greater focus on the (more stable) Canadian market over the more volatile foreign markets.
That’s an important distinction to note, because the Canadian market is well-regulated, stable and mature when compared with many international markets. The well-regulated and conservative approach of the banks is particularly important when looking at comparable American banks.
For investors, this means that CIBC is a great option when evaluating long-term holdings. The bank also trades at an attractive price-to-earnings ratio of just 10.48. Adding to that appeal is CIBC’s juicy quarterly dividend, which pays out an attractive yield of 4.81%.
Using that $25,000, investors can expect to earn an income just shy of $1,200. Like Fortis, CIBC has an established cadence of providing annual bumps to that dividend.
Telecoms can be a source of stability and income
One final option for investors looking to grow long-term holdings is BCE (TSX: BCE). BCE is the largest of Canada’s telecoms, offering subscription-based services to customers across Canada.
Those services include wireless, wireline, TV and internet segments, all of which provide significant defensive appeal to the stock. The defensive appeal of those segments has only increased since the pandemic.
BCE’s stock has struggled in recent years, dropping 30% over the trailing 12-month period. Those struggles were largely attributed to rising interest rates, which led to some aggressive cost-cutting efforts by BCE.
Fortunately, those efforts are now bearing fruit. In the most recent quarterly update, BCE reported net earnings of $505 million, reflecting a 16.1% increase over the prior period.
Turning to income, the dip in stock price has left BCE offering investors one of the highest-paying dividends on the market. As of the time of writing, the yield works out to an insane 12.32%.
This means that investors with $25,000 to invest in BCE will generate an income of just over $3,150.
Prospective investors should note that as part of its cost-cutting efforts, BCE halted its annual dividend increase last year. Some pundits also see a dividend cut coming in the future to make that payout more sustainable, but even a 50% cut will leave BCE as one of the better-paying options on the market.
Add to your long-term holdings
No stock, even the most defensive, is without some risk. That’s especially true during a volatile period like we are seeing right now.
In my opinion, a small position in one or all of the above stocks is warranted as part of any long-term, well-diversified portfolio.
Buy them, add them to your long-term holdings, and watch your portfolio (and income) grow.
