2 Dividend Aristocrats I’d Buy for 2020

TD Bank (TSX:TD)(NYSE:TD) and another corrected dividend aristocrat I’d buy more of for 2020.

| More on:

2020 is shaping up to be another volatile year with a risk of recession that’s apparently the highest it’s been in recent memory. While the year may not introduce the next market crash that everybody’s been talking about lately, it’d still be wise to ensure that you’re paid a handsome dividend for riding a market roller coaster ride that could get even scarier with a looming U.S. election.

Consider TD Bank (TSX:TD)(NYSE:TD) and CN Rail (TSX:CNR)(NYSE:CNI), two Canadian dividend aristocrats that have corrected in recent months. Both firms have the capacity to support double-digit dividend hikes every year through thick and thin, and both are ideal buy-the-dip candidates for those looking to batten down the hatches going into the new year.

TD Bank

With an ultra-conservative loan book and a low-volatility retail earnings stream, TD Bank is viewed as a premium bank that deserves a premium multiple relative to its peers in the Big Six.

Over the past year, TD Bank stock pulled back along with the broader basket of bank stocks over industry-wide macro headwinds. More recently, the bank was a casualty of the brokerage price wars that saw TD Ameritrade slash its trading commissions to $0, an unexpected move that acted as salt in the TD Bank’s wounds.

In a prior piece, I noted that the adverse reaction in response to TD Ameritrade’s commission elimination was a severe overreaction and that a new business model focused on services would “go above and beyond just trade execution.”

At the time of writing, TD Bank stock trades at just 10.5 times next year’s expected earnings with a 4% yield.

Most analysts are still reluctant to pound the table on bank stocks as we head into year-end, but as macro headwinds gradually fade in the new year, a series of analyst upgrades could be rebound fuel for the bank stocks, TD Bank in particular, which always seems to come roaring out of the gate.

CN Rail

CN Rail (TSX:CNR)(NYSE:CNI) is another boring dividend aristocrat that’s been raising its dividend for decades. If you systematically bought the stock on dips over time, with little to no consideration for how the broader economy is fairing, you would have done incredibly well over time.

CN Rail’s CFO warned that a softening economy would negatively impact freight volumes; shares of CN Rail, along with many other rail stocks, have been grinding to a halt.

Given that CN Rail is a perennial outperformer with a knack for surprising to the upside in spite of unfavourable economic conditions, I think the now lowered bar set ahead of CN Rail has created a terrific entry point for investors who desire to form an “all-weather” foundation for their portfolios as we head into a year that’s sure to be plagued with uncertainty.

CN Rail stock sports a 1.9% yield, which is slightly higher than that of the five-year historical average yield of 1.6%. With further double-digit dividend hikes a near certainty and a valuation that’s a tad cheaper than historical averages, CN Rail is a prudent bet that could make up for lost time in the new year.

Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of Canadian National Railway and TORONTO-DOMINION BANK. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. CN is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

profit rises over time
Dividend Stocks

Buy 2,990 Shares of This Stock for $165.25/Month in Passive Income

A high-yield dividend stock can transform your investment into monthly passive income streams.

Read more »

close-up photo of investor Warren Buffett
Dividend Stocks

3 Warren Buffett Stocks to Buy Hand Over Fist in November

Warren Buffett has been buying Occidental Petroleum (NYSE:OXY) hand over fist. He previously owned the similar Canadian oil giant Suncor…

Read more »

dividend growth for passive income
Dividend Stocks

Is Intact Financial Stock a Buy for its 1.8% Dividend Yield?

Intact Financial's dividend is not that attractive, but its strong history of execution and dividend growth are compelling factors for…

Read more »

Hourglass and stock price chart
Dividend Stocks

Where Will Brookfield Stock Be in 5 Years?

Based on its recent successes, Brookfield Corp (TSX:BN) looks poised to be more valuable in five years' time than today.

Read more »

hand stacks coins
Dividend Stocks

The Smartest Dividend Stocks to Buy With $400 Right Now

The market is full of dividend stocks to buy. Here's a look at two options that cater to both growth…

Read more »

ways to boost income
Dividend Stocks

This Top TSX Dividend Stock Down 10.78% Is Ready for a Rebound

The rebound of an underperforming but top TSX dividend stock is coming due to a significant product diversification.

Read more »

Canadian Dollars bills
Dividend Stocks

3 Dividend Stocks to Supercharge Your Passive Income

These companies are known for their consistent payout histories and high yields can supercharge your passive-income portfolio.

Read more »

space ship model takes off
Top TSX Stocks

My 5 Favourite Stocks to Buy Right Now

There are plenty of great stocks on the market. Here's a look at my favourite stocks to own for growth…

Read more »