Canadian investors can’t be blamed for sitting on cash over the last few years. Volatility might be an understatement with a pandemic, trade wars, and actual wars ravaging the entire globe. It can be quite hard to think about investments when markets continue to bob up and down.
However, if you’re now anxious about getting back into the market, there’s an easy way to get back in. That’s by looking for blue-chip Canadian companies that have proven in the long run to be some of the most stable investments. And at the top of many lists? Fortis (TSX: FTS), Toronto-Dominion Bank (TSX: TD), and Canadian Natural (TSX: CNQ).
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Why this mix?
Let’s first discuss this wide range of stocks. Fortis stock is a regulated utility and energy infrastructure holding company that operates across North America and the Caribbean. It’s well known as a top dividend stock, with 51 years of consecutive increases behind it. What’s more, the regulated utility provides predictable cash flows, with management guiding a 4% to 6% dividend increase through 2029, supported by a 72% payout ratio.
Then there’s TD stock, one of Canada’s biggest Big Six banks. It’s a core Canadian banking franchise with operations in the U.S. and Canada. The bank stock benefits from gains in capital markets, trading, and underwriting operations. Therefore, it’s shown to see revenue growth even in challenging markets. As a large, diversified Canadian bank with a payout ratio at just 36% and a 3.83% dividend yield, there’s both growth and income to look forward to.
Finally, we have CNQ, one of Canada’s largest integrated oil and gas producers with operations spanning from oil sands to natural gas and liquids with assets around the world. The company continues to see major free cash flow, acquiring additional assets to see that liquids-rich footprint rise. It also offers a higher dividend yield at 5.3%, supported by buybacks as well.
How I’d allocate
Together, investors now have a stable mix of a regulated utility, Canadian bank, and higher-yield commodity producer. By putting these in a Tax-Free Savings Account (TFSA), you can thereby also create income that’s tax-free!
So, how might investors allocate their $70,000 if they want moderate income and balanced risk? A good idea might be to put 40% into Fortis, 30% into TD, and 30% into CNQ. From there, try to stagger buys. Split each allocation into three or four trades over four to six weeks; this will drip-feed the investment through dollar-cost averaging. Investors can also use limit orders a little below market if they want to control the price they pay.
From there, keep a 1% or 2% cash buffer so you can do some small rebalancing when opportunities arise. You’ll also want to consider a dividend-reinvestment plan (DRIP). This will help your investment continue to grow instead of letting the cash from dividends simply sit there! Overall, here’s how much income you might make right away with an investment in these stocks.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| FTS | $68.99 | 405 | $2.46 | $996.30 | Quarterly | $27,940.95 |
| TD | $109.82 | 191 | $4.20 | $802.20 | Quarterly | $20,975.62 |
| CNQ | $45.40 | 462 | $2.35 | $1,085.70 | Quarterly | $20,974.80 |
Bottom line
So, your $70,000 investment is creating massive income, all while creating stable growth as well. Of course, investors will need to keep checking in quarterly on earnings, dividends, and payout ratios. Make sure to rebalance once per year to get back to your target weights if they drift about 5% to 10%. As well, watch for any triggers such as dividend cuts or a downgrade. Yet, overall, these are three dividend stocks that certainly provide you with the least stress when it comes to your investment strategy.
