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2 Safe High-Yield Dividend Stocks to Buy in Case the Market Crashes

Christopher Liew, CFA
·4 mins read
Safety First illustration
Safety First illustration

Risk factors are again threatening the advance of the S&P/TSX Composite Index. The index is trending downward in each of the trading sessions in the last four days. Global stock markets are experiencing a new round of selling, because surging COVID-19 cases are reigniting fears.

While the stock market is on the brink of another crash, there’s a pair of safe high-yield stocks for income seekers. Both companies should continue the dividend payouts, even if the market tumbles. It’s essential to have more financial cushion during the recession.

Standout payer

TransAlta Renewables (TSX:RNW) stands out with income investors because of its high yield and monthly payouts. You don’t need substantial capital to generate extra income. The green stock is reasonably priced at $15.59 per share and offering a generous 5.93% dividend.

An initial investment of $25,000 will produce $123.54 in monthly passive income. In a 10-year holding period, your cash will balloon to $44,476.41. The $4.5 billion company uses the internally generated cash to grow its portfolio strategically. TransAlta has the financial capacity to pursue future investments that will drive growth.

Shares are up 5.41% year to date, which indicates resiliency in this challenging period. Analyst covering the renewable energy sector names TransAlta as one of the wind stocks with the least profit decline and most profitable growth. Wind and hydroelectric plants are its strongest renewable power generation assets.

Reliable income

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is an exceptional income stock. Canada’s fifth-largest lender is offering a lucrative 5.71% dividend. A lump sum savings of $150,000 will earn $2,141.25 quarterly. Since this blue-chip asset is also a buy-and-hold stock, you have income for a lifetime. It’s the supplement to pensions.

The stock price has gone down to as low as $65.36 on March 23, 2020, during the market selloff. However, it climbed by 55.78% to $101.82, which is almost the pre-coronavirus level. In the Q3 fiscal year 2020 (quarter ended July 31, 2020), the $1.17 billion net income was 192.5% higher than the preceding quarter.

CIBC has been paying dividends for 152 years. Since the pandemic onset, the bank’s CEO Victor Dodig has assured investors that no dividend cut is forthcoming. Management understands the importance of reliable income. As such, the goal is to make sure the payouts are flowing. Nothing can be more comforting if a blue-chip company makes this commitment to worried investors.

Risk factors

Three high-profile risks can overturn the stock market’s gains following the rebound from COVID-19 lows. The economic despair might extend if there’s a second wave of the coronavirus. Likewise, the resolution of the pandemic might take a year or more.

Another surge could lead to prolonged weakness in the labour market. The temporary layoffs might become permanent unemployment. Fortunately, Canada is ready with a new set of stimulus packages that will buoy the economy and tide people over.

Political uncertainty could also cause a market collapse. The U.S. presidential elections are nearing, and a change in administration can rock the boat. Hence, investor anxiety will remain high from today until the last quarter of 2020.

The post 2 Safe High-Yield Dividend Stocks to Buy in Case the Market Crashes appeared first on The Motley Fool Canada.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned.

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