2 Dividend Stocks to Buy Amid the Virulent Delta Coronavirus Variant

The highly transmissible Delta coronavirus variant has triggered a rise in coronavirus cases, which is increasing the fear of a fourth wave coming to Canada. The general recommendation continues to be getting vaccinated while keeping masks on when you’re in indoor public areas or when social distancing cannot be maintained.

In any case, the Delta strain could slow down economic reopening plans. With this setting in mind, here are a couple of defensive dividend stocks you can consider buying today. They delivered excellent business performance during the pandemic last year and should continue being defensive in any subsequent waves.

Fortis stock: A defensive dividend stock you can depend on

As electricity and natural gas are essential products and services, perhaps even more so, as people stayed longer at home during the pandemic, regulated electric and gas utility Fortis (TSX:FTS)(NYSE:FTS) remained defensive in 2020. The higher residential usage offset the decline in commercial usage, as some businesses temporarily closed their offices for example.

Fortis’s 2020 revenue increased by 2% to $8.9 billion, while its adjusted earnings per share rose marginally by less than 1% to $2.57. This is a big achievement, since many businesses had huge drawdowns in revenues. Among the hardest-hit businesses are theatres, restaurants, hotels, airlines, etc., because of temporary economic lockdowns, travel restrictions, or social-distancing measures.

The bottom line is that Fortis stock was able to maintain its dividend-growth streak with a 6% dividend hike last year on a safe payout ratio of approximately 75%. I’ll have you know that Fortis has a fabulous dividend-growth streak of 47 consecutive years and counting. In fact, its business is so predictable that the management already projects an average dividend growth of 6% per year through 2025.

Investors looking for a defensive name can consider picking up some fairly valued Fortis shares today for a forward yield of close to 3.8% on an expectation of a dividend increase of 6% next month.

A top Canadian REIT

People invest in real estate primarily for income. However, it comes with making down payments, making mortgage payments, managing tenants, maintaining properties, paying taxes and insurance, etc.

You could hire a real estate agent with the leasing, but it’ll come with extra cost. If you’re not maintaining the property yourself, you’re hiring someone to do it. So, it comes with work, and the costs can add up. What’s the net income you get from your real estate investment after all the cost? Is the work worth it?

There’s a more passive way to invest for rental income — by buying units of real estate investment trusts (REITs). REITs are immediately more diversified because they invest in a portfolio of real estate properties.

However, REITs are subject to volatility risk similar to stocks. So, REITs can fall substantially during a market correction, which could be a great time to buy. You must be selective about the REITs you choose, because the quality of the underlying management team and growth potential of the REIT’s cash distribution is important.

One exceptional Canadian REIT that continues to shine is Canadian Net REIT. It’s rare for REITs with dividend growth. Ones that do typically grow their dividend by about 3% per year. In contrast, Canadian Net REIT has increased its cash distribution by approximately 10% since 2012. And it pays an initial juicy yield of 4% today.

The post 2 Dividend Stocks to Buy Amid the Virulent Delta Coronavirus Variant appeared first on The Motley Fool Canada.

Unlock our top stocks for the “T288 era”

We now believe that a game-changing announcement by Apple in a matter of weeks could launch nothing less than a whole new era of technology — the “T288 era.”

With estimates believing this era could grow to US$7 trillion in annual sales — that’s 8x BIGGER than last year’s e-commerce sales…

The Motley Fool has produced a full investing plan to try taking full advantage of what Deloitte calls “the next digital transformation.”

Click below to learn more!

Learn more

More reading

4 Top Canadian Dividend Stocks to Buy With $400 in August 2021
Where to Invest $5,000 Right Now
3 Top Stocks That Could Set You Up for Life
14 Top TSX Stock Picks for August 2021
Screaming Buy! This Canadian Growth Stock Could Rally Soon

The Motley Fool recommends Canadian Net Real Estate Investment Trust and FORTIS INC. Fool contributor Kay Ng owns shares of Canadian Net Real Estate Investment Trust and FORTIS INC.

Leave a Reply

Your email address will not be published. Required fields are marked *