After a long time of historically low interest rates, the economy is finally feeling the effects. The onset of a global pandemic, combined with various geopolitical factors, forced Canadian regulators to take corrective measures. To control red-hot inflation, the government has increased interest rates over the last two years.
While the long-term impact of increasing interest rates will be positive, it is hurting the economic landscape right now. As most investors scramble to ensure better protection for their portfolios, Canadians with a long investment horizon are also repositioning portfolios to prepare for what comes next.
In this environment, investing in solid dividend stocks offers some degree of protection for your portfolio. Granted, market volatility might lead to depreciation in share prices. Still, reliable dividend income can keep lining your account balance with extra cash until recovery grows the value of your investments later. To this end, here are three TSX dividend stocks you can add to your portfolio as this month ends.
Brookfield Infrastructure Partners (TSX:BIP.UN) is a massive $14.89 billion market capitalization company diversified into several sectors of the global economy. As the owner of high-quality and essential assets diversified worldwide, it has a substantial presence in the utility industry. Utility companies enjoy the position of being essential businesses that can virtually never lose demand for their services.
BIP owns an estimated 71,600 km of electricity distribution lines and 16,200 km of natural gas pipelines. While it also has assets with exposure to transport, midstream, and data, the utility segment is its main cash cow.
It is also a reliable dividend stock that aims to increase its payouts by up to 9% annually for the foreseeable future.
Having increased its payouts at a compound annual growth rate (CAGR) of 6.2% in the last five years, it looks well positioned to deliver further growth. As of this writing, it trades for $32.46, paying its shareholders at a 6.3% dividend yield.
For many Canadian investors, Fortis (TSX:FTS) is a mainstay in their self-directed portfolios. Fortis is a $26.38 billion market capitalization utility holdings company. It runs regulated natural gas and electricity utility businesses in Canada, the U.S., Central America, and the Caribbean.
Having increased dividend payouts for 50 consecutive years, Fortis is a Canadian Dividend Aristocrat of the highest order. Not only is it a reliable dividend stock, but it also has the predictable cash flows to fund growing its payouts regularly and comfortably.
Its dividend-growth streak makes it a proven dividend income stock that can keep pace with inflation. As of this writing, Fortis stock trades for $53.97 per share, paying its shareholders at a juicy 4.37% dividend yield.
Hydro One (TSX:H) might not have been around as long as Fortis, but it has every bit of potential to become a Canadian Dividend Aristocrat.
The $21 billion market capitalization company headquartered in Toronto is one of the largest electrical utility companies in North America, boasting one of the most robust balance sheets in the industry. The fact that it only went public in 2015 is the reason it lacks a long dividend-paying track record.
In the eight years since it went public, Hydro One stock has grown investor capital at an astounding 10.4% CAGR. Aiming to maintain a 70-80% payout ratio, it has increased its dividends at a 5.3% CAGR for the last five years. As of this writing, it trades for $34.89 per share, boasting a 3.40% dividend yield.
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Inflation surged to 8% in Canada last year. While regulators have cooled it down to 3.8%, there is still a way to go until it reaches the target 2% level.
It means uncertainty and a harsh economic environment will likely persist. Shoring up your portfolio with reliable dividend stocks can help you outpace inflation. Brookfield Infrastructure stock, Fortis stock, and Hydro One stock can be excellent bets for this purpose.
Before you consider Brookfield Infrastructure Partners, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023… and Brookfield Infrastructure Partners wasn’t on the list.
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See the 5 Stocks
* Returns as of 10/10/23
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