Dividend income from stocks can be a real lifeline when stocks turn volatile. If you pick your dividend stocks wisely, you can receive dividend income even when the stock market is rocky.
That is why it is a smart idea to hold a couple of these stocks in any portfolio. They may not be exciting or have a tonne of growth. Yet, they deliver stable cash returns that can offset the impacts of a fluctuating market.
Luckily, Canada has plenty of dividend stocks to look at. Here are two dividend stocks that would be worth buying and holding through the market’s ups and downs ahead.
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A utility and midstream stock for growing dividends
AltaGas (TSX: ALA) has one of the most attractive combinations of growth, defensive qualities, and income in Canada. Part of this is due to its two unique businesses.
Around 50% of its income comes from its regulated utility business in the United States. This is a nice safety net. You get the regulated, steady income, but it also happens to be growing at an attractive rate.
The utility is seeing strong growth in regions, which is supporting new connections and modernization opportunities. It expects to grow by an 8% compounded annual growth rate going forward. For a utility, it is a very attractive growth profile.
The remaining 50% of income comes from its Western Canadian midstream business that supports the liquefied petroleum gases (LPG) value chain. Today, AltaGas supplies 6% of China’s LPG imports, 14% of South Korea’s, and 11% of Japan’s imports.
Those imports are only expected to increase as it brings new LPG capacity and export terminals online in the coming years. Disruptions in the Strait of Hormuz mean AltaGas is enjoying strong pricing and increased volumes from its terminals.
This stock has a strong history of increasing its dividend annually. Its modest payout ratio and improving balance sheet support further mid-single-digit dividend growth. It yields 2.5% today.
A diversified stock for monthly income
Exchange Income Corporation (TSX: EIF) is another dividend stock that could be very interesting for the coming seven years. Like AltaGas, this is a growth and income play.
Exchange operates a diversified business with a focus on aviation, aerospace, defence, and manufacturing/industrial service businesses. It just acquired Canadian North Airlines, which cements it as a leading airline to Canada’s north.
Given Canada’s investment in northern infrastructure, mining, and defence capacities, Exchange is expected to see rising demand for its aviation services. This same trend also plays into its manufacturing capacity, where it is a leading environmental mat manufacturer. Investments in infrastructure will mean more matting solution demand should remain strong for years ahead.
Exchange has seen growth increase to a double-digit rate. At the same time, its balance sheet has considerably improved. This provides it ample flexibility to continue its organic investments and make acquisitions in the future.
Exchange has grown its monthly dividend for 19 of the past 21 years. It yields 2.45% today. It is not necessarily cheap at today’s price. However, any major pullback could be a good time to make this dividend stock a long-term holding.
