Vaccine breakthroughs and a change in the political landscape south of the border are supporting a turbulent market. But for low-risk investors, dividend-paying stocks are the way to go. Today we’re going to take a look at three of the main types of income stocks to buy and hold for the long term.
The solid balance sheet
Fortis is one of the best securities to buy for its payment history. That record is now 47 consecutive years of dividend payments. That’s almost half a century of reliability. This gives Fortis that key characteristic that all low risk investors should be looking for now: predictability. It’s the biggest thing Fortis has to offer, and it’s a quality that adds a definite shine to a modest 3.8% yield.
The rich dividend stock
Enbridge (TSX: ENB) (NYSE: ENB) currently pays a rich dividend yield of 7.6%. This yield increased by 8% all year, as a drop in energy consumption rocked the power generation industry. At a glance, however, this is a stock that is trading at almost 30% of its fair value, but also envisages annual earnings growth of almost 50%. It’s all a pairing of data points.
In terms of value, Enbridge’s price is 1.5 times its book value. It’s almost reasonable for a stock of this caliber. It is also a company that is positioning itself for the green revolution, with a renewable energy capacity of 2,000 megawatts in its portfolio of assets. Total yields by the middle of the decade could be around 33% according to conservative estimates. However, this choice of wide moat could turn out to be deceptively high growth.
The defensive market leader
From one market leader to another, Nutrients (TSX: NTR) (NYSE: NTR) is about as defensive as it gets. Nutrien has one of the biggest economic moats of any stock on the TSX. While consumer staples are generally at the same level when it comes to low risk assets, this year has proven that nothing is ever easier.
Indeed, Nutrien is often neglected in favor of other choices with wide staves. Consider the fanfare enjoyed by names like the aforementioned Enbridge, or the ever-popular CN Rail. But Nutrien arguably has a much wider market penetration globally than either of those two names. Nutrien also has a dividend yield of 3.7% and could benefit from 32% annual earnings growth in the coming years.
Agricultural products are the main game of basic consumption. That said, however, they often don’t get a lot of press when it comes to investment strategies. Nonetheless, as a world leader in potash production, as well as a leading producer of other agricultural inputs, Nutrien is therefore one of the world’s leading consumer staples companies.
By holding Fortis, Enbridge and Nutrien in an equity portfolio, investors build a solid foundation in their wealth creation plan. Short-term, pandemic-focused growth assets should look tempting over the next few months. But balancing them with long-term passive income choices can both reduce the risk of capital loss and add peace of mind to a multi-year basket of TSX stocks.
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Crazy contributor Victoria Hetherington doesn’t have a position in any of the stocks mentioned. David Gardner owns shares of Canadian National. The Motley Fool owns stock and recommends Canadian National Railways and Enbridge. The Motley Fool recommends Canadian National Railways, FORTIS INC and Nutrien Ltd.