When volatility picks up and investors start worrying about a recession, the first instinct is often to reduce risk. And while that can make sense in certain situations, one of the most effective ways to prepare for economic uncertainty isn’t necessarily to sell everything; it’s to make sure that you own high-quality Canadian dividend stocks in the first place.
Recessions sound scary, and they certainly cause significant job losses and volatility in the stock market. However, the reality is that recessions don’t impact all companies equally. Highly cyclical businesses can see profits drop sharply. Companies that provide essential services, though, or ones that operate with long-term contracts, often see far less disruption.
That’s why dividend sustainability becomes even more important during uncertain periods. If a company can continue generating steady cash flow and maintaining its payout even during slower economic growth, that’s the kind of stock investors can hold with confidence.
That’s why the best recession-resistant dividend stocks aren’t flashy. They’re typically businesses that are more boring and stable, with predictable revenue and cash flow, and which operate in industries that don’t rely on booming consumer spending.
So, if you want to ensure your portfolio is full of safe and reliable Canadian dividend stocks that could survive a recession and continue rewarding shareholders, here are three of the best on the TSX.
Source: Getty Images
One of the best defensive growth stocks on the TSX
When it comes to finding stocks to buy and hold for the long haul with confidence, there’s no question that Brookfield Infrastructure Partners (TSX: BIP.UN) is a top pick.
Brookfield is incredibly reliable because it owns essential infrastructure assets around the world, including utilities, pipelines, data infrastructure, transport assets, and midstream energy operations. The keyword is essential.
The businesses that it owns and operates are assets that governments, businesses, and consumers rely on every single day. Electricity transmission lines, toll roads, natural gas pipelines, and data centres don’t suddenly stop being needed during a recession.
Furthermore, in addition to the essential nature of its assets, much of Brookfield’s cash flow is backed by long-term contracts or regulated frameworks, which provide predictability even during economic downturns.
That contractual structure is what supports its consistent cash flow generation and ability to continue paying and growing its distribution over time.
Because Brookfield also operates globally and across multiple sectors, it benefits from diversification that reduces reliance on any single economy.
So, if you’re looking for a reliable Canadian dividend stock that can survive a recession, there’s no question that Brookfield Infrastructure and its current yield of 4.7% is a no-brainer.
One of the best dividend growth stocks that Canadian investors can buy
In addition to Brookfield Infrastructure, another top Canadian dividend stock to buy and hold with confidence through any economic environment is Enbridge (TSX: ENB).
Enbridge is one of the most widely owned dividend stocks in Canada for a reason. It’s a massive $158 billion energy infrastructure company that’s critical to the North American economy.
Furthermore, in addition to providing essential services, most of its cash flow is generated through long-term, fee-based contracts. That means even if energy demand slows modestly during a recession, the company’s revenue stream remains relatively stable.
This is what has allowed Enbridge to not only continue paying its dividend, which currently yields 5.4%, for three straight decades, but continue to increase that dividend annually.
And when a company can continue to grow its dividend through any economic environment, it’s a Canadian stock you can certainly buy and hold with confidence.
An ultra-reliable Canadian REIT
Many Canadian REITs are reliable dividend payers, but one of the very best has to be CT REIT (TSX: CRT.UN)
CT REIT is a retail REIT that has a unique relationship with Canadian Tire, its largest tenant and majority shareholder. In fact, roughly 90% of CT REIT’s business comes from Canadian Tire and its related banners.
This is crucial because that relationship is what makes CT REIT particularly resilient.
Canadian Tire is one of Canada’s best-known retail brands, and since most of CT REIT’s properties are leased under long-term agreements with built-in rent escalators, its future cash flows are highly predictable.
That predictable revenue doesn’t just keep CT REIT’s 5.5% dividend yield safe, it’s what’s allowed CT REIT to increase that dividend ever year since going public, including through the pandemic when many of its retail REIT peers were heavily impacted.
So, if you’re looking for reliable Canadian dividend stocks to buy now, CT REIT is certainly a top pick.
