When many investors think of dividend stocks, they want to hold for a decade or two, certain factors come into play.
Sure, the up-front dividend yield a given stock provides is important. Investing in a company with a strong balance sheet that can continue to pay these dividends is also important.
But as we face what could be an incoming recession (given the plethora of warning signs that are flashing red right now), finding defensive dividend stocks to buy is many investors’ top priority.
Here are two of my top picks right now for those in this boat.
Alimentation Couche-Tard
I’ve recently pointed to Alimentation Couche-Tard (TSX:ATD) as a sneaky dividend stock for investors seeking meaningful long-term growth. I think that thesis more than holds right now.
Indeed, Couche-Tard is viewed by many investors more as a growth play than a bond-like offering. The company’s 1.1% dividend yield won’t entice any true passive-income aficionados to this stock. And that’s fine, considering the company’s long-term growth trajectory, which has been driven by its growth-via-acquisition strategy.
Acquiring a host of small and mid-sized family-run gas stations and convenience stores, and rolling them into the company’s diversified portfolio of such companies, Couche-Tard has found a “secret sauce” in a boring sector many have overlooked. This has allowed the company to quietly become a global juggernaut in this sector, now one of the top five players in this space.
I think this growth trajectory could continue and potentially accelerate over time, as Couche-Tard looks for other vertical opportunities outside of its core business segments to grow. I don’t know which companies Couche-Tard will target next, but I do know fireworks are possible. This is an exciting company in a boring sector that long-term investors can own for its defensive profile and strong total returns.
Fortis
I think it’s actually somewhat of a similar story with utility giant Fortis (TSX:FTS).
Investors looking for meaningful upside in an era which will undoubtedly be shaped by surging energy demand (thanks to the rise of AI, machine learning, crypto, and other key innovative technological developments) have increasingly begun looking at utility and energy providers as a way to play a picks and shovels approach to this revolution.
I think that line of thinking is correct. And with most of Fortis’s business still coming via regulated utilities sales to loyal residential and commercial customers, the cash flow stability this company provides makes it a top defensive stock in any market to consider.
For dividend investors looking for consistent and stable dividend growth, Fortis could be the best pick in the market. That’s why I continue to pound the table on this name, and I’m not going to stop.
