After the U.S. started several different trade wars, including one with Canada, the much-feared impact on the global economy is taking shape. As of this writing, the S&P 500 Index is down by 13.74%.
The benchmark index for the U.S. stock market has company in terms of the ongoing decline. Stock markets worldwide are plummeting due to economic ties with the United States. The Canadian benchmark index, the S&P/TSX Composite Index, is faring better but is down by 8.19% year to date.
Canadian stocks appear to be performing better than their U.S. counterparts because many U.S. stocks were overvalued. Most Canadian stocks are fairly valued or are undervalued. Canada also has no shortage of safe dividend stocks that investors can use to protect their capital during times of market volatility.
While the share prices might not be immune to the effects of the downturn, reliable payouts from high-quality dividend stocks can provide regular returns that investors can rely on until markets recover.
Against this backdrop, here are two TSX dividend stocks from the energy sector you can consider adding to your self-directed investment portfolio.
Source: Getty Images
Cenovus Energy
Cenovus Energy (TSX: CVE) is one of Canada’s largest integrated oil and natural gas companies. Headquartered in Calgary, the company focuses on creating value by developing its oil sands assets. It also produces conventional crude oil, natural gas liquids, and natural gas in Alberta.
CVE stock is also feeling the impact of the decline. As of this writing, it trades for $15.94 per share. Down by almost 47% from its 52-week high, it boasts a higher-than-usual 4.52% dividend yield. The company has had its fair issues with its refining business. According to analysts, a shift to focusing on oil production and monetizing its assets might provide a much-needed uplift when the market conditions improve.
Cenovus has significantly reduced its debt load and has the ability to return almost its entire excess cash flow to shareholders. Its aggressive dividend growth has seen its payouts increase eightfold compared to its dividends in 2021. It can be a good investment to consider.
Enbridge
Enbridge (TSX: ENB) is a long-standing, reliable stock that is a staple in many investor portfolios for worry-free dividend income. It is an even bigger integrated energy infrastructure company than Cenovus. As of this writing, it trades for $59.78 per share. Down by almost 9% year to date, the stock is also performing better than many of its peers. At these levels, it also boasts an inflated 6.31% dividend yield.
The juicy dividend yield alone makes it an attractive investment. Besides that, the company’s foray into renewable energy has further diversified its assets, which also include utility businesses. Its highly contracted cash flow structure and high system utilization also contribute to its ability to consistently pay and grow dividends.
The company’s resilient business model has allowed it to increase payouts for 30 years. While the dividend yield is unusually high, the payouts seem well-protected in the bigger picture. It is one of the few energy companies best suited to power through the current market volatility and emerge stronger on the other side.
Foolish takeaway
It is important to remember that a significant recession can impact the dividends of even the most reliable dividend stocks. A sustained downturn in the economy can force the underlying companies with excellent track records for dividends to slash or even pause payouts to ensure the ability to continue providing long-term value to shareholders.
Stock market investing is inherently risky and even riskier during such times. It is important to make well-informed decisions. Between Enbridge stock and Cenovus stock, Enbridge has a wider economic moat, which gives it a better chance to navigate the ongoing turbulence than Cenovus stock.
