When the world and the stock market are swaying, reliable dividend stocks become attractive havens for capital. These types of stocks pay a steady stream of dividend income that provides a tangible cash return.
Likewise, these stocks tend to zig when the market zags. This means that these stocks tend to have a low beta. This means their returns are less correlated to the broader market. It can be a smart idea to own a few of these in any portfolio.
If you have $6,000 to deploy, here are two dividend stocks to buy now and hold for the next potential downturn.
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AltaGas: A dividend-growth stock early in its journey
AltaGas (TSX: ALA) used to be a volatile stock that was heavily correlated to the price of commodities. That profile has drastically changed in the past few years. Today, it has a beta of 0.55, meaning it is less volatile than the broader market.
Today, 55% of its income comes from a very high-quality, regulated utility operation in the United States. Only 44% of its business is in energy midstream.
Today, around 85% of its income is from long-term contracted business. It has longer-term ambitions to reduce commodity exposure to less than 10% of its income.
Demand for Canadian propane and butane in Asia is fuelling growth opportunities in its midstream business. Likewise, its utility expects 8% compounded annual rate base growth all the way to 2029.
The company has sold off non-core assets and drastically reduced debt. It still has some work to de-lever, but it sequentially improves debt each quarter. Its business model is largely de-risked and primed for steady, stable growth.
AltaGas trades with a 3.4% dividend yield. Its yield has declined in the past five years because its stock has swiftly risen by 145%. It has also returned to a dividend growth posture. Since 2021, its dividend has risen by a 6% compound annual growth rate (CAGR). It targets a 5-7% dividend growth CAGR to the end of 2029.
Overall, AltaGas has a lot of things that you want in a resilient dividend stock. Buy and hold this stock for the next five to 10 years, and you should enjoy a nice combination of total returns.
Intact Financial: A great stock for income and growth
Another dividend stock for volatile times is Intact Financial (TSX: IFC). This dividend stock has a 0.36 beta. You can see a very steady return in its stock price. In the jurisdictions where it operates, people must have insurance for their homes or automobiles. It is a necessary, mandated service. People need insurance regardless of the economy. That is one reason why Intact is a resilient business.
Intact is Canada’s largest property and casualty insurance provider. Its scale allows it to provide the best pricing, which further allows it to gain market share.
Intact is very well managed. It consistently earns a low-teens return on equity and maintains a low 90% combined ratio. Expansions in the U.K. and the U.S. are facing some near-term challenges, but it continues to expect good growth from these regions.
Intact is a dividend-growth legend. This stock has paid 20 consecutive annual dividend increases since it was listed in 2004. Its dividend has grown by a 12% CAGR since 2005. Today, it yields 1.75%. It is not the cheapest stock right now. However, if it were to pull back, it would be a great addition for a long-term hold.
