Market volatility is something that cannot be avoided. That’s why cautious investors tend to seek out safer high-yield dividend stocks as core holdings in long-term portfolios.
Those safer high-yield dividend stocks tend to be established businesses with long dividend histories and solid cash flow.
The market provides plenty of great examples of companies that meet that criteria. Here’s a look at three options that mix a combination of income, stability and long-term growth potential.
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Fortis offers the most defensive dividend
Fortis (TSX:FTS) is a name that should be familiar to most investors. The company is one of the largest utility stocks in North America, offering electric and gas utility service to markets across Canada, the U.S., and the Caribbean.
Fortis’s revenue stems from regulated operations across those markets. The essential nature of utility service means that Fortis benefits from predictable demand and recurring, stable revenue streams. This means Fortis is less exposed to volatile commodity prices.
It also means that Fortis is able to offer investors a stable and growing quarterly dividend. In fact, Fortis has the second-longest dividend-growth record in Canada, with 52 consecutive years of annual increases.
As of the time of writing, Fortis offers a yield of 3.21%.
For cautious investors seeking high-yield dividend stocks, Fortis may not offer the highest yield, but its defensive appeal makes it a must-have in any portfolio.
Scotiabank combines income with recovery potential
It would be nearly impossible to compile a list of high-yield dividend stocks for cautious investors and not mention one of Canada’s big bank stocks. That bank stock to consider is Bank of Nova Scotia (TSX:BNS).
As one of Canada’s big banks, Scotiabank benefits from stable, recurring revenue from its domestic market. The bank also has a growth-focused international segment that in recent years has shifted to more mature markets in North America.
That international exposure also introduces added risk, as loan losses and weaker economic conditions can make earnings more volatile than those of a regulated utility.
That mix of domestic stability and international growth has allowed Scotiabank to pay out a handsome dividend without fail for over a century. As of the time of writing, Scotiabank offers a 3.71% yield.
Enbridge provides the highest yield
Rounding out the list of safer high-yield dividend stocks is Enbridge (TSX:ENB). Enbridge is one of the largest energy infrastructure companies on the market. The company operates an extensive portfolio of pipelines, natural gas utilities, storage facilities, and renewable energy assets.
Prospective investors should note that the bulk of Enbridge’s revenue from those segments stems from long-term contracts and regulated assets. This means Enbridge’s revenue stream isn’t tied to the volatile price of crude.
Still, Enbridge remains a capital-intensive business with a sizeable debt load. That makes disciplined spending and steady cash flow essential to supporting the dividend.
As a result, Enbridge’s cash flow is predictable, allowing it to invest in growth initiatives and pay a handsome dividend. As of the time of writing, Enbridge’s quarterly dividend carries a yield of 5.09%.
Even better, the company has provided annual increases to that dividend for over three decades without fail. For investors looking at safer high-yield dividend stocks to invest in, that makes Enbridge a compelling option.
Which safer high-yield dividend stock is best?
No stock is without risk, and that includes the trio of investments mentioned above. That’s also why diversifying a portfolio is important.
Fortunately, each of the three stocks mentioned above offers a defensive moat and something specific to investors.
Fortis is the dividend knight that offers stability and dividend growth. Scotiabank balances income and growth potential. Finally, Enbridge offers the highest yield to investors.
In my opinion, one or all of the above should be core holdings in any well-diversified portfolio.
Buy them, hold them, and watch your portfolio grow.
