2 Dividend Stocks I’d Bet Will Beat the Market in a Downturn

Even though the TSX Index (and the main indices south of the border) are in a great spot heading into the holiday season, it feels as though we’re headed for something ominous. Though it’d be nice to have a so-called Santa Claus rally of sorts, there might not be much to look forward to this year, perhaps other than a lump of coal.

Of course, if the Federal Reserve in the U.S. has another 25-basis-point rate cut up its sleeve with a side of some more dovish commentary (I think the commentary is key to the market’s path forward), there may very well be a year-end melt-up that precedes even more strength going into the new year. Either way, I think steady dividend stocks are worth sticking with if you’re worried about a valuation bust, a growth scare, or even some sort of economic recession. Undoubtedly, the TSX Index may be profoundly strong, but the Canadian economy isn’t exactly firing on all cylinders.

But if a tariff deal can be struck sooner rather than later, perhaps the right cards will fall into place, and the TSX Index might be able to keep on moving higher. After the latest private Carney-Trump meeting, perhaps there’s nothing to fear on the tariff front, even though recent tariff threats on fertilizer may be a concern for some. In any case, cheap dividend stocks could be the way to go. And in this piece, I’ll go over two intriguing ideas worth standing by, even if the economy experiences modest gains from here.

Nutrien

Nutrien (TSX:NTR) stock was under a bit of pressure on Monday, as Trump fertilizer tariff threats caused waves through the Canadian market. Undoubtedly, the last thing Nutrien needs is more tariff fears, with shares retreating nearly 2% on Monday’s session. I think any such dips on transitory headwinds are a buying opportunity for the longer-term thinkers out there.

After a decent year of gains, with shares of NTR rising over 25%, I think there’s room to be a bit more bullish despite the concerning headlines. At the end of the day, Nutrien is one of the highest-quality agricultural commodity producers out there with a steady retail business. And with a 3.7% dividend yield alongside a mere 15.8 times trailing price-to-earnings (P/E) multiple, the name screams value, especially in a market that some might consider to be overly frothy and overdue for a bit of a painful decline at some point.

Leon’s Furniture

Leon’s Furniture (TSX:LNF) is another great low-cost dividend stock for investors looking for deals. Shares slipped 2.2% on Monday on seemingly no new horrific developments. Either way, the stock has been going sideways and is likely to continue well into the year’s end.

The big question is whether the Canadian furnining play can act like a coiled spring going into the Spring. I think the setup looks good, as does the valuation (11.2 times trailing P/E) and the dividend yield (3.3%). Though the consumer discretionary sector faces challenges, I’m a fan of Leon’s for its dominance in Canadian furnishings.

The retailer has a wide moat, and one that won’t be easy to erode away over time. The next leg higher might arrive well before the consumer and the Canadian economy have a chance to flex their muscles. As such, I’d buy and collect the dividend as shares “hibernate” for a while.

The post 2 Dividend Stocks I’d Bet Will Beat the Market in a Downturn appeared first on The Motley Fool Canada.

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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Leon’s Furniture and Nutrien. The Motley Fool has a disclosure policy.