Do you have $1,000 set aside and want to invest? In a volatile stock market environment, it can be challenging to determine where the money would be ideal to park. Many people new to investing in the market think that timing the dip can be a good way to make the most of your investment capital. Unfortunately, it’s impossible to predict exactly when the next dip comes. The best you can do is to position your portfolio to benefit from one when it does come around.
Buying a small position in dividend stocks before a pullback makes more sense. This way, you get exposure to the stock and start receiving returns through quarterly distributions immediately. You can be ready to add more shares to your portfolio if share prices fall.
The trick is to identify stocks that can weather the downturn and recover to better valuations when the dust settles. This approach lets you make the most of your investment capital without taking unnecessary risks with it.
If I had $1,000 to invest today, here are the two Canadian dividend stocks I would consider adding to my self-directed investment portfolio.
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Toromont Industries
Toromont Industries (TSX:TIH) is a $17.83 billion market capitalization firm headquartered in Concord, Vaughan. The company engages in the distribution of construction equipment, power systems, and other critical needs across several industries. It sells, rents, and services Caterpillar equipment across most of Canada. It also has CIMCO under its belt, the company’s arm selling industrial refrigeration systems. Due to its power and energy businesses, CIMCO has been seeing considerable growth.
The critical infrastructure support it provides makes Toromont Industries valuable to the Canadian economy. The demand for its products and services is strong, and its recent quarterly earnings report reflects that. Its first quarter for the fiscal year saw TIH stock’s revenue increase by 13% year over year. Its operating income climbed by 44%, and net earnings rose by 25% in the same period.
As of this writing, it trades for $219.75 per share and pays investors $0.56 per share each quarter, translating to a 1,02% dividend yield. While meager right now, a dip in share prices later can inflate its dividend yield, and you can lock in higher-yielding returns when that happens.
TMX Group
TMX Group (TSX:X) has a ticker that might confuse some investors into thinking it is related to a certain social media platform, but TMX is far from it. The $14.73 billion market-cap company engages in operating global markets and building digital communities and analytic solutions for clients across various industries. It is the company that owns and runs the financial infrastructure behind Canada’s capital markets, making it critical to the regional economy.
The Toronto Stox Exchange, TSX Venture Exchange, Montreal Exchange, market data, analytics, and several others come under its belt. Simply put, TMX is what makes sure the markets in Canada can function. Due to the essential nature of its work, it can be a good pick in any market environment. As of this writing, it trades for $52.95 per share and pays investors $0.26 per share, translating to a 1.96% dividend yield.
Foolish takeaway
Investing in any dividend stock before the dip will not do the trick. You must consider whether the underlying businesses have what it takes to recover from a dip and boast the potential to grow the income you generate from returns.
To this end, TMX stock and TIH stock fit the bill perfectly. One is responsible for owning and running critical market infrastructure, and the other provides important support to the country’s industrial and power economy.
A $1,000 divided across both stocks means you can start collecting dividends now and be ready to purchase more if the market sell-off moves share prices into undervalued territory for superior long-term returns.
