First off, if you’re an investor who has a portfolio filled with meme and growth stocks, opting to move into penny stocks in hopes of an explosion, this isn’t the article for you. Or, I suppose it might be if you’re finally willing to admit that dividend stocks are just as important, in fact, more so than those potential growers.
While growth stocks can be fun, they should only comprise a very small part of your overall portfolio. I’m talking under 5%, without the need to constantly rebalance during any growth spurts. Meanwhile, investors should then look for stability for their portfolio, and stability often comes with dividends. Which is why today we’re going to look at three dividend stocks that can help balance your portfolio with rewards over risk.
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CTC
Canadian Tire (TSX: CTC.A) is a great place to start. This retailer has a solid past and even more growth in the future. That’s especially true after picking up Hudson Bay product lines that add to the already solid Canadian retailer. And after its recent quarter, it’s clear why the retailer can afford such growth.
The dividend stock reported consolidated comparable sales up 5.6% year over year, with retail revenue up 5.3%, all while offering a 4.3% dividend yield at 11.2 times earnings. This all means you’re getting in on a high dividend, a strong stock, and a great deal.
What’s more, there’s even more growth on the way for the dividend stock. It recently launched its True North loyalty program, with 21 of 54 planned store refreshes currently underway. Add in the larger Triangle Rewards loyalty partnerships, and the HBC brands deal, plus a $400 million repurchase plan, and this is one dividend stock only getting better.
FTS
One of the first dividend stocks I ever looked at was Fortis (TSX: FTS) and honestly, it hasn’t disappointed. This dividend stock now has over 50 years of consecutive dividend increases, with the utility company demonstrating quarter after quarter why it’s still one of the top choices on the TSX today.
In the second quarter, net earnings rose to $384 million with earnings per share (EPS) at $0.76. Furthermore, it has a $26 billion plan aiming to grow its rate base from $39 billion in 2024 to $53 billion by 2029! Ambitious, but certainly possible. Especially with wins like its battery storage project under its belt and more data centres under negotiation.
Then there’s the value and income you get from this dividend stock. FTS holds a 3.6% yield at writing, with a solid 72% payout ratio. What’s more, it targets growth of 4% to 6% for its dividend through 2029, all while trading at 19.2 times earnings and an incredibly defensive beta of 0.32.
BMO
Now if you want a dividend, look to long-term payouts. You’ll immediately find that Bank of Montreal (TSX: BMO) has the longest in Canada, with over 200 years of dividend payouts! And it’s clear that’s not disappearing any time soon.
The dividend stock recently reported third-quarter earnings that saw net income rise 25% to $2.3 billion and EPS up 26%. It also announced an increase to its buyback program, repurchasing 15.7 million so far with the goal of 30 million.
Meanwhile, BMO stock offers up a 3.6% dividend yield at writing, has a 56% payout ratio, and trades at just 13.6 times earnings. All of this isn’t just reasonable, it’s lucrative. Especially when considering the share price is already up almost 50% year-to-date!
Bottom line
What all these three have in common is history. They are dividend stocks that have the backing investors want, with even more growth in the future. So forget meme stocks. These can offer a core base for investors and turn any portfolio into a long-term income powerhouse.
