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5 Defensive Dividend Stocks to Ride Through Market Corrections

In market corrections, stocks can typically decline 10-20% but corrections can be as severe as something like 50%. That can be unsettling especially when you have a huge portion of your savings or net worth in stocks.

It’d help tremendously to allocate a meaningful portion of your portfolio in defensive dividend stocks, which tend to fall less than the market in a correction as well as pay you decent and growing dividend income over time.

These defensive stocks should also have underlying businesses that are resistant to recessions — meaning their earnings or cash flow generation stay strong and maybe even growing even during harsh economic periods.

These quality dividend stocks can be expensive at times. So, investors should buy them when they’re at good valuations whenever possible.


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Fortis (TSX:FTS)(NYSE:FTS) is a diversified regulated utility that generates predictable returns on its assets. It has 10 utility operations, including a transmission company in the U.S., and electric and gas utilities.

Because Fortis offers essential products and services that are used in good and bad economic times, its earnings and dividends tend to be stable and growing over time. As a result, Fortis is one of the top dividend stocks in Canada. It has increased its dividend per share for 45 consecutive years.

At about $50 per share, Fortis offers a safe yield of 3.6%, and it aims to increase the dividend by about 6% per year through 2023. Unfortunately, the stock has run up, and it’d be safer to buy the stock on a pullback to at least $46 per share.


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Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has strong retail-focused businesses in Canada and in the U.S. and is one of the top 10 banks in North America. The quality bank is well managed and profitable. Its recent capital ratio and return on equity were 12% and 15.4%, respectively. In the trailing four quarters, its net income was $11.4 billion.

Historically, TD Bank has delivered long-term returns of 10% or higher per year as long as the shares were bought at good valuations. At $75.75 per share as of writing, the stock offers a safe yield of 3.9% and trades within a fair valuation. In the medium term, TD Bank targets 7-10% earnings-per-share growth. So, an investment today can deliver long-term returns of about 11-14%. That’s excellent for a low-risk investment.


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Enbridge (TSX:ENB)(NYSE:ENB) is the leading energy infrastructure company in North America. Similar to Fortis, Enbridge has a regulated business. About 98% of its cash flow is regulated. It has a wide network of liquids pipelines and gas transmission assets.

Its low-risk business model has proven to generate stable cash flows that are resilient to commodity price volatility. This has allowed Enbridge to increase its dividend for 23 consecutive years and running.

At under $50 per share as of writing, the stock offers a safe yield of 5.9% and trades within a fair valuation. Longer term, Enbridge anticipates to grow its distributable cash flow per share by 5-7% per year. So, an investment today can deliver long-term returns of about 11-13%. That’s attractive for a low-risk, high-yield investment.


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Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY) is diversified globally across multiple asset types, including office, retail, multifamily, logistics, hospitality, triple net lease, self-storage, student housing, and manufactured housing.

At about $28 per unit as of writing, the stock offers a safe yield of 6.3% and trades at a meaningful discount from its fair value. Brookfield Property aims to increase its cash distribution by 5-8% per year. So, an investment today can deliver long-term returns of about 11-14%. That’s attractive for a low-risk, high-yield investment.

Brookfield Property’s cash distribution can consist of interest income, REIT dividend, and return of capital from the U.S. Due to the complexity of its cash distribution and the fact that real estate is inherently meant to be a long term, income generator, Brookfield Property makes a great holding in an RRSP.


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Learn More About This TSX Stock Now

Unlike the other four defensive dividend stocks, Alimentation Couche-Tard (TSX:ATD.B) offers a small yield of 0.6%. However, its long-term returns are nothing to sneeze about. Since 2007, the stock has delivered annual total returns of 20% and a $10,000 investment would have turned into more than $95,000. Its 10-year dividend growth rate of 23.6% is also stellar.

Couche-Tard has been an excellent capital allocator. It has grown its empire of convenience stores to more than 12,600 locations across North American and Europe. Most locations offer road transportation fuel dispensing. It also has more than 2,100 licensed stores in other parts of the world.

Couche-Tard has shown a strong track record of earnings and cash flow growth while paying down debt with discipline after making acquisitions to expand its footprint.

After the latest run-up, Couche-Tard stock may dip or experience another consolidation phase. If it does, investors should take the opportunity to accumulate shares for long-term growth.

Defensive dividend stocks can help you ride through market corrections, but investors must do their part by not overpaying for stocks. Even the most defensive stocks can perform poorly if you pay too much for them and you’ll get smaller starting dividend yields and lower estimated total returns.

Of the stocks discussed, TD Bank, Enbridge, Brookfield Property, and Couche-Tard are worth building a position in at their current valuations if you have an investment horizon of at least five years.

TD, Enbridge, and Brookfield Property are especially defensive thanks to offering yields of about 4-6%. In a market correction, shareholders can be reassured with their decent regular dividends.


Kay Ng owns shares of TD Bank, Enbridge, Brookfield Property, and Couche-Tard.


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