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3 Dividend Stocks to Build a Recession-Proof Portfolio and Generate Passive Income

Scott Mulligan
Piggy bank next to a financial report

The criteria for a company to be considered a Dividend Aristocrat in Canada is much more lenient than America, but it is still a good indicator of a stable stock with a safe dividend. It is easy for a company to continue dividend growth when markets are favourable, but what about when times get tough?

As investors transition toward retirement, it becomes important to have a reliable income stream that won’t be cut in a recession. Let’s go beyond the five-year period of dividend growth required for Dividend Aristocrats and look at three stocks that increased dividend payments during the last major market downturn in 2008.


Telus (TSX:T)(NYSE:TU) is currently yielding a 4.5% dividend and is a good option for income-focused investors. Unlike competitors who have diversified into media assets, Telus derives the majority of revenue from telecommunications with wireless revenue accounting for 57% of total revenue in 2018. The telecom infrastructure built by Telus has the benefit of producing a predictable and recurring income stream.

While the growth of the stock price is modest, the dividend growth is anything but modest with an annual average increase of 9% over the past 10 years. Telus saw the stock price cut in half during the 2008 recession, but the dividend held steady and quickly began to grow again. Telus recently announced the upcoming dividend payable in July will increase by 3.2%.


Enbridge (TSX:ENB)(NYSE:ENB) might be the perfect dividend stock for retirement. The stock price can fluctuate based on the price of oil and other news, but that should not worry investors who have seen the company increase dividend payouts for the last 23 years.

Enbridge has already announced intentions to raise the dividend by 10% in 2019 and 2020. This would place Enbridge in the elite group of American Dividend Aristocrats which require 25 years of continuous dividend growth. Considering the current dividend yield is 5.9%, investors can enjoy high quarterly payments without worrying about the sustainability of those payments.


While a 3.5% dividend yield from Fortis (TSX:FTS)(NYSE:FTS) doesn’t immediately jump out at investors, it is the dividend-growth story that makes Fortis one of the most famous TSX dividend stocks. Fortis has proven that slow and steady annual dividend increases are the way to build a sustainable long-term dividend-growth stock. It is this approach that has led to 45 consecutive years of dividend growth.

The Canadian utility is a stable stock that produces an incredibly stable dividend. The 45-year dividend-growth history for Fortis shows no correlation to market performance or downturns. Fortis is the type of stock you want to own in retirement.

Investor takeaway

Dividend stocks often form the backbone of retirement portfolios, but it is hard to accurately judge the sustainability of a dividend when we have experienced a decade-long bull run. While not an accurate prediction of future performance, it is a useful exercise to look back and evaluate how a dividend performed during previous market downturns.

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Fool contributor Scott Mulligan owns shares of Telus, Enbridge, and Fortis. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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