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Everything costs more – from groceries to pumping fuel to the gas station to haircuts to the salon! Inflation is a normal phenomenon where a normal basket of goods consumed by ordinary people increases in cost. However, recent inflation rates have been higher than usual due to “supply chain disruptions and pent-up consumer demand for goods after the economy reopens,” as described by this Forbes item.
There’s no need to panic, however. Here are three safe Canadian dividend stocks that can help you fight rising inflation!
Bank of Montreal Stocks
Bank of Montreal (TSX:BMO)(NYSE:BMO) is trading at a reasonable valuation of around 11.5 times earnings. Under normal market conditions, the bank’s return on equity remains favorably in the teenage range.
Given its ability to grow single-digit earnings per share, the safe, dividend-paying Canadian stock can generate long-term returns of around 9% per year. Today, BMO stock offers a safe yield of around 3.5%. Its quarterly dividends allow investors to sit in on the stock and earn periodic returns without selling a single stock.
The large, stable bank will continue to benefit from Canada’s strong financial regulatory system and oligopoly structure. New immigrants are more likely to collect and manage their money in large Canadian banks than in smaller ones.
Investors can more than keep up with the long-term rate of inflation by sitting still and receiving a growing dividend from the shares of Canada’s major banks.
Rising inflation has not deterred quality utility stocks from rising recently. In reality, Fortis (TSX:FTS)(NYSE:FTS) is trading near an all-time high! This means investors are hoarding their money in the highly predictable stock. It is predictable in terms of income and dividend payments.
Fortis provides essential products and services. Most of its assets are for transmission and distribution. As a result, the regulated electric and gas utility achieves very stable earnings throughout market cycles. It has thus been able to increase its dividend every year for almost half a century!
The Canadian dividend-paying stock is yielding 3.5% right now. It will be able to increase its dividend faster than long-term inflation, as it has done in the past. While I wouldn’t jump into the stock today due to its full valuation, investors who bought FTS shares at a much lower cost should feel pretty comfortable following the price appreciation of the stock. ‘last year.
Canadian Net REIT
I am surprised Canadian Net REIT (TSXV:NET.UN) is not trading at a higher valuation. (Its fair value is expected to be about 15% higher than $7.85 per share.) That may be because it is largely ignored by Bay Street, trades on the TSX Venture Exchange, and has a low trading volume. However, if you look at Canadian dividend stocks, you’ll find that they’re perfect for passive income TFSA investors looking for a bit more growth. Canadian REITs don’t normally offer the kind of growth that the Canadian Net REIT does.
The Canadian REIT pays a monthly cash distribution that yields 4.3% at subscription. It has increased its dividend for about a decade with a five-year dividend growth rate of about 13%. The dividend is protected by growth in funds from operations (FFO) and a sustainable FFO payout ratio of approximately 50%. Its cash flows are more stable than the usual SCPI, because it invests in commercial real estate under long-term leases without management and triple net.