2 Top Dividend Stocks to Buy and Hold for Life

Dividend stocks like Canadian National Railway and TD Bank are excellent long-term assets to buy and hold.

| More on:
Man data analyze

Image source: Getty Images

Stock market investing during volatile market conditions is particularly challenging. It is difficult to identify good investments when uncertainty in the market can lead to selloffs resulting in significant losses. As of this writing, the S&P/TSX Composite Index is down by 7.9% from its 52-week high.

The Canadian benchmark index has recovered to this point after rallying upward in the last few weeks. Despite the recent rally, analysts and economists predict the onset of a recession this year.

Considering the possibility of a recession looming overhead, investing in dividend stocks might be the best way to put your capital to work in the market.

Even if a downturn leads to losses through declining valuations, the dividend income can keep providing you with returns while you wait for the dust to settle. If you bet on the right stocks, you can recover the losses from market volatility through capital gains when the market calms down.

Picking the right high-quality dividend stocks is essential for this purpose. I will discuss two top-notch dividend stocks you can buy as long-term, income-generating assets for your self-directed portfolio.

Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD) is one of the top Canadian bank stocks to consider if you want to add high-quality dividend stocks to your portfolio. The Toronto-based $163.86 billion market capitalization financial services giant is among Canada’s Big Six banks and is one of the best dividend-paying stocks on the TSX. Boasting a dividend-paying streak of almost two centuries, it is one of the first Canadian publicly traded companies to distribute a share of its profits to shareholders.

As of this writing, TD Bank stock trades for $89.95 per share, boasting a juicy 4.27% dividend yield. It offers the highest-yielding returns among its peers in the Big Six, but that is not the only reason to consider adding it to your portfolio.

The bank has a significant presence in the Canadian and international markets. It is currently purchasing First Horizon Bank for $13.4 billion — a move that will add $85 billion worth of assets under its belt. It also has plans to purchase Cowen, another financial institution that will expand its presence further.

With plenty of growth on the horizon, a stable dividend history, and high-yielding dividends at current levels, it can be an excellent buy-and-hold investment.

Canadian National Railway

Canadian National Railway (TSX:CNR) is another staple in many dividend-income portfolios for Canadian investors. A Canadian Dividend Aristocrat of the highest order, it has been increasing shareholder dividends for around half a century. It means that CN Railway stock does not just pay its shareholders regularly. It also increases its payouts each year without fail.

The $112.43 billion market capitalization railway giant is the only North American railroad connecting three coasts, giving it an edge in the industry.

While CN Railway stock does not offer much in terms of growth potential, it compensates for it through its reliable dividend history. It plays a crucial role in the North American economy by transporting goods from coast to coast in Canada and its significant presence in the U.S.

As of this writing, CN Railway stock trades for $166.65 per share and boasts a 1.76% dividend yield. Granted, the dividend yield is not high, but it is sustainable, reliable, and virtually guaranteed.

Foolish takeaway

For new investors, financial advisors typically recommend beginning by investing in low-cost index funds that diversify their money across several securities, limiting capital risk. However, it’s important to understand that the lower the risk there is, the fewer returns you’ll get.

If you want to be bold by picking individual stocks, investing in high-quality stocks that keep risk to a minimum while offering better returns than low-cost index funds can be a better approach.

TD Bank stock and Canadian National Railway stock can be two excellent buy-and-hold assets for this purpose.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

More on Dividend Stocks

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Utility Stocks That Are Smart Buys for Canadians in November

These utility stocks benefit from regulated businesses and generate predictable cash flows that support higher dividend payouts.

Read more »

Start line on the highway
Dividend Stocks

Invest $10,000 in This Dividend Stock for $600 in Passive Income

Do you want to generate passive income? Forget the rental unit! This option will save you the mortgage yet still…

Read more »

Senior uses a laptop computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

TD Bank (TSX:TD) shares are way too cheap with way too swollen a yield for retirees to pass up right…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »