When you buy a stock for its dividend income, you want to know that its income will be sustained in any type of economic environment. In many ways, the security of a dividend is just as important as how large its yield is.
The best dividend stocks can grow their dividends regularly because their businesses are growing. You want stocks that can sustain their dividends through cash flows and earnings, not just through debt or share issuance. Here are three dividend stocks I would be happy owning through most any economic situation.
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Fortis: A leading defensive dividend stock
Fortis (TSX: FTS) has delivered incredibly consistent returns over its lifetime. Over the past 10 years, it has delivered a 10% total compounded annual growth rate (CAGR). Over the past 20 years, it has delivered a 9.8% CAGR.
The company has built a resilient set of nine regulated utilities focused on transmission/distribution assets across North America. Fortis is diversified by regulator, economy, and region. It helps ensure a steady income stream across its broader portfolio.
Right now, this dividend stock is targeting a 7% rate base CAGR over the coming five years. That should support 4-6% compounded annual dividend growth. That would be on top of 52 consecutive years of dividend increases already!
Fortis is a low-beta stock, meaning it is much less volatile than the broader market. Despite that, it has still delivered some pretty decent returns over the long term. If you want a resilient (albeit boring) stock to hold for a growing stream of income, Fortis is a perfect match. It yields 3.4% right now.
Chartwell: A stock with a huge trend behind it
Chartwell Retirement Residences (TSX: CSH.UN) is riding a long-term wave that is not going to end any time soon. Canada is aging. Baby boomers are downsizing and are looking for communities that provide housing, friendship, food, and health services. Chartwell fills all these needs as the largest retirement community provider in Canada.
This dividend stock has a long runway for growth ahead. It is both acquiring and developing new communities. Retirement community supply is expected to fall short of demand over the coming 10 and 20 years. That should provide a strong push on rental rates over time.
Chartwell has been delivering double-digit growth over the past couple of years. Occupancy is sitting close to 95%, so there is still room for improvement. This stock earns a 3% yield. Chartwell just resumed its dividend-growth posture with a recent increase.
Canadian Natural: A top dividend-growth stock
The final dividend stock I’d ride with through any economy is Canadian Natural Resources (TSX: CNQ). Certainly, as an energy stock, Canadian Natural is subject to commodity prices, which does increase its volatility.
However, Canadian Natural has built an incredibly resilient energy production giant. Its scale means it can produce energy in high volumes at an extremely efficient cost. With decades of reserves, it doesn’t need to invest heavily to expand its resources.
Consequently, it is a cash-generating machine. With minimal debt for a company of its size, it can let the majority of its cash return to shareholders.
This stock has increased its dividend for 26 consecutive years. For a commodity business, it is a very impressive track record. It yields 3.6% right now.
