The Canadian dollar has been on a roller-coaster ride in August. At times, it has benefited from weakness in the U.S. dollar and British pound. However, fears of a global recession have kept a lid on its gains in the late summer. Canada’s yield curve inverted by the most in almost 20 years earlier this month, which sparked the largest single-day decline in the dollar since the end of winter.
There are signs that the dollar should remain steady into 2019. Chief among them is a conservative Bank of Canada, one you could even call borderline hawkish in comparison to the turn taken by many its peers in the developed world. Inflation in Canada held at 2% in the month of July, which strengthens the central bank’s case against a rate cut this year.
Still, investors should prepare for monetary easing as we look ahead to 2020. Global growth is set to slow in the face of headwinds. Even if a recession is averted, policymakers will be looking to spur growth through stimulus. I’m targeting dividend stocks that offer stability and steady income as we look ahead to the new year.
BCE
BCE (TSX:BCE)(NYSE:BCE) is a top Canadian telecommunications company. Telecoms, like utilities, are well worth targeting in a low interest rate environment. These equities boast a wide economic moat and typically have a long history of dividend payouts. BCE has achieved dividend growth for 10 consecutive years.
The company released its second-quarter 2019 results on August 1. As usual, BCE drew strength from wireless as it reported 185,667 net customer additions in Q2 2019. This was up 25.5% from the prior year. Net earnings rose 8.7% year over year to $817 million and cash flow from operating activities climbed 1.8% to $2.09 billion.
BCE stock had a price-to-earnings ratio of 18 as of close on August 21 but a high price-to-book ratio of 3.4. The stock currently offers a quarterly dividend of $0.7925 per share, which represents an attractive 5.1% yield. It continues to boast strong cash flow generation, which should support dividend growth into 2020 and beyond.
Canadian National Railway
Canadian National Railway (TSX:CNR)(NYSE:CNI) stock has climbed 23% in 2019 as of close on August 21. The company boasts a wide moat and has historically performed well under a softer Canadian dollar. This makes it a worthwhile target in the second half of 2019.
CNR released its second-quarter 2019 results on July 23. Revenues rose 9% year over year to $3.95 billion, and the company reported record Q2 diluted earnings per share of $1.88. Operating income climbed 11% from the prior year to $1.68 billion. Earnings were buoyed by the weaker Canadian dollar in addition to freight rate increases and higher volumes from petroleum crude and grain.
The stock also boasts a P/E ratio below 20 and a high P/B value of 4.9. CNR last paid out a quarterly dividend of $0.5375 per share. This represents a modest 1.7% yield. However, the company has achieved dividend growth for 23 consecutive years. This puts it in elite company on the TSX.
