Are you a beginner investor starting out with only a small sum of money – let’s say $400? If so, it pays to invest in stocks that fit your needs. While it might be tempting to think that while you’re starting out small you should take more risk, research finds that the opposite is the case. Wealthier investors are actually more able to bear risk and gamble on high returns than small investors are. So, if you’re starting out with just $400, you’re better off investing in low risk assets. Things like index funds and blue chip dividend stocks tend to work well for small investors because they are less risky than penny stocks, crypto, and other gambles. With that in mind, here are three smart dividend stocks to buy with $400 right now.
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Alimentation Couche-Tard
Alimentation Couche-Tard Inc (TSX: ATD) is a Canadian gas station/convenience store company that operates the famous Circle K chain. The company is highly respected for its long-term compounding track record, which has seen its earnings rise 189% over the last 10 years.
Alimentation Couche Tard stock got cheap last year when the company tried to buy out 7/11. The company offered $40 billion for its acquisition target, a sum that could only have been raised with borrowing or equity issuance. ATD built its reputation on prudent acquisitions, which it funded with retained earnings rather than heavy borrowing. This massive offer for 7/11 seemed out of step with ATD’s past approach, and it also valued 7/11 somewhat steeply. Investors started worrying that the company had lost its way. Thankfully, ATD pulled its offer for 7/11, leaving a highly profitable collection of quality assets that produce plenty of income and are sensibly valued.
EQB Inc
EQB Inc (TSX: EQB) is a Canadian branchless bank. Its stock pays a dividend, and while the current yield (2.5%) isn’t high, it has been growing quickly over time. Over the last five years, EQB has grown its dividend at a rate of 23.5% per year. That’s an extremely high dividend growth rate, and it was largely supported by high growth in EQB’s underlying business. EQB Inc saves a lot of money with its branchless model, and it locks in long-term funding by issuing guaranteed investment certificates (GICs) instead of chequing accounts. Overall, it’s a dividend stock that is very much worth looking into.
Fortis
Fortis Inc (TSX: FTS) is a Canadian utility company. Its stock yields 3.5%, and the dividend payout has grown by 5.1% per year over the last five years. Fortis, as a regulated utility, enjoys highly stable revenue. People would rather sell their cars than go cold in the Winter. But unlike many Canadian utilities, it is also growing, with its earnings having compounded at 4.9% per year over the last five years. Fortis is currently embarking on a massive capital expenditure plan that will increase the value of its assets and achieve regulator approval for rate hikes. This will increase Fortis’ revenue, making the large amounts spent very much worth it. Fortis is one dividend stock that has worked out well long-term.
