2 Canadian Dividend Stocks Worth Snapping Up on Any Dip

Buying the dip of a fundamentally strong stock boosts your returns. Imagine buying Suncor Energy (TSX:SU) and Canadian Natural Resources (TSX:CNQ) at their pandemic dips. No one knew that the oil and gas sector would become the next gold mine. All a knowledgeable investor could forecast was that the oil price would recover when the lockdown ended.

What is the benefit of buying dividend stocks at the dip?

In 2020, the energy sector suffered losses because of a demand shock triggered by the lockdown. Suncor even slashed its dividend for the first time in 18 years. Since this demand shock was induced and not a shift in consumer behaviour, it was a given that demand would return when lockdown eases. Investors should have the financial capacity to hold through a downturn. Those who manage to sustain the dip are rewarded through recovery.

Selecting Suncor and Canadian Natural Resources to buy the dip was a no-brainer, as they are the top two oil producers in Canada. They have sustained steep oil price dips and rallies and become efficient over time through financial discipline. Their +20 years of dividends prove their financial discipline and ability to wait through the downturn.

A $10,000 investment in each of the two stocks anytime between April and December 2020 would have bought you 757 shares of CNQ and 435 shares of Suncor. Today, this $20,000 investment would have earned you $2,936.5 in annual dividends. That’s a 30% dividend yield on your investments made possible by the significant growth in dividends per share by the two companies in this cyclical rally. This dividend will keep growing, although at a slower rate.

YearCNQ dividend per share$10,000 investment in CNQ @$13.2/shareSU dividend per share$10,000 investment in SU @$23/shareTotal Dividend Income2026$2.50$1,892.50$2.40$1,044.00$2,936.502025$2.35$1,778.95$2.28$991.80$2,770.752024$2.14$1,618.09$2.18$948.30$2,566.392023$1.85$1,400.45$2.08$904.80$2,305.252022$2.30$1,741.10$1.88$817.80$2,558.902021$1.00$756.05$1.05$456.75$1,212.802020$0.85$643.45$1.10$476.33$1,119.78Value of Shares757 shares$49,962.00435 shares$40,885.65$90,847.65

That’s the power of buying the dip of a dividend stock. This was the best-case scenario. Can you replicate such a scenario anytime soon? Yes, but the dividend may not last long.

The next growth cycle

When oil prices cool, gold prices surge. This has been the trend of the post-COVID world, where geopolitical conditions have deteriorated. Gold price surged from around US$2,000/oz in 2020 to US$4,500/oz in 2026. This price could cross US$5,000/oz as central banks worldwide increase their gold reserves. The current situation seems to unfold a 1980s-like oil crisis.

Gold surged 400% in just 16 months in 1980 as the 1979 Iranian Revolution and the oil shock raised fears that oil-producing nations might abandon the U.S. dollar. Moreover, the United States suffered from stagflation, forcing investors to seek safe-haven assets.

In the current environment, Iran has once again come into the limelight, threatening 20% of the global oil supply. Major oil-importing countries are diversifying their oil supply to reduce dependence on a few nations. They are rationing oil and moving to alternative green sources, which could affect long-term oil demand if the supply issues continue. Countries are buying gold as their confidence in the dollar shakes. The gold price has already surged 150%.

Now may be the time to start selling oil stocks and instead buy gold stocks, before the 1980-like crisis resurfaces.

Two Canadian dividend stocks worth buying in the dip

Lundin Gold (TSX:LUG) stock has already dipped 26% from its April high as gold prices cool from over US$5,000 to US$4,500/oz. Now is the time to buy the dip as the gold miner will give a variable dividend equivalent to 50% of the free cash flow above $300 million. Its fixed quarterly dividend is $0.30, but the company declared a $1.15 dividend per share in the first quarter. Last year, it paid a $2.75 dividend per share, almost four times the annual fixed dividend of $0.6.

Power Corporation of Canada is another stock to buy at any dip, which could be triggered by a market downturn. The financial holding company can sustain a recession and recover along with the stock market performance.

The post 2 Canadian Dividend Stocks Worth Snapping Up on Any Dip appeared first on The Motley Fool Canada.

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More reading

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• Meet the 5.3% Yielding Dividend Stock That Could Soar in 2026
• Enbridge vs Suncor: The Dividend Pick I’d Own Through 2026
• TFSA Investors: 1 Set-It-and-Forget-It Stock for 2026

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.