The economic environment continues to remain bearish, as high inflation continues forcing banks to raise key interest rates. As of this writing, the S&P/TSX Composite Index is down by over 10% from its 52-week high. With share prices declining across the board, many investors are looking for ways to reposition their portfolios for a possible recession.
For many, taking their money out of the stock market and into gold and other safe-haven assets is a go-to approach. However, savvier investors look at these downturns as an opportunity to buy up shares of dividend stocks to lock in higher-yielding dividends. Recessions are a part of the economic cycle, things will continue to worsen. That said, it is only a matter of time until the dust settles and share prices recover.
Investing in just any high-yielding dividend stock is not a wise way to put your money to work in the stock market during bearish conditions. Investors must consider focusing on defensive businesses that can perform well during recessions. While not immune to recessions, defensive companies are in a better position to navigate recessionary periods and continue paying investors their shareholder dividends.
Today, we will look closely at two Canadian Dividend Aristocrats with lengthy dividend-growth streaks that can be good investments for this purpose.
Fortis
Fortis (TSX:FTS) is as defensive a business as it can get for a recession. The $26.75 billion market capitalization giant is a utility holdings company.
It owns and operates several natural gas and electricity utility businesses across Canada, the U.S., Central America, and the Caribbean. With most of its revenue coming through highly rate-regulated markets, the stock is well positioned to generate stable and predictable cash flows.
While the boring nature of its industry means it does not deliver stellar growth when the economy is booming, that same quality makes it a pillar of stability during volatile markets. It is also a Canadian Dividend Aristocrat boasting a 50-year dividend-growth streak, one of the longest on the TSX. As of this writing, it trades for $57.99 per share, boasting a 4.29% dividend yield.
Enbridge
Enbridge (TSX:ENB) is the second of the two defensive businesses I picked for this article. Another Canadian Dividend Aristocrat, Enbridge stock has grown the payouts for its investors for the last 28 years.
The $92.87 billion market capitalization stock is a major player in the North American energy industry. Headquartered in Calgary, it owns and operates an extensive pipeline network that transports hydrocarbons throughout Canada and the U.S.
In a bid to prepare itself for the greener energy industry of the future, it has also made substantial investments to generate renewable energy. Like Fortis, it provides services that are essential to the region’s economy. Even if a recession hits, the demand for its services can allow it to generate enough cash flows to continue funding its payouts.
As of this writing, Enbridge stock trades for $43.57 per share, boasting a juicy 8.15% dividend yield inflated due to its discounted share prices.
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Foolish takeaway
At 50 years and 28 years, respectively, Fortis stock and Enbridge stock have some of the longest dividend-growth streaks on the TSX. The Canadian Dividend Aristocrats have powered through recessionary periods time and time again, delivering returns to investors through reliable payouts and long-term capital gains.
Of the two, Fortis stock looks better positioned to continue its lengthy dividend-growth streak. While future-proofing itself for a greener energy industry, Enbridge stock might entail more risk than the former as a long-term investment for dividend income.
