Holding money in a savings account can earn you a very modest risk-free return of 1% or higher, but generally, you’d be hard-pressed to find a better return where you can also pull out your money whenever you want. That’s why holding a good and stable dividend stock can be a much better alternative to a savings account.
If a stock has little volatility and also pays a dividend, investors can earn a good return and not have to worry about significant drops in value.
Telus Corporation (TSX:T)(NYSE:TU) could be a good stock to invest in for the purpose of just accumulating dividends and perhaps some nominal capital appreciation along the way.
The stock’s low beta makes it a stable buy One reason why Telus could be a good long-term investment is that its beta of around 0.4 demonstrates that the stock does not follow the market’s swings as its movements are much more modest.
The higher the beta, the more volatile the stock. With Telus, however, investors won’t have to worry about volatility, which is a good thing if you’re primarily looking to collect a dividend.
While there have been times when the stock has gone on strong rallies, this isn’t a stock that’s made investors rich through capital appreciation, at least not recently with the stock up around 1% in the past year alone.
Although the share price was able to break through $50 a share this year, those increases in value proved to be short-lived, as the stock has remained stuck in a range and likely will continue to be for the foreseeable future.
All about the dividend income While I wouldn’t normally suggest buying a stock solely for the dividend income, with Telus there is a good reason to make an exception. The company is among the industry leaders and the lack of growth in the stock’s value is merely indicative of the stability of the industry.
While Telus will trade customers back and forth with its peers, it would take a significant development for its share price to see a strong rally, which is indicative of how mature the industry is.
While Telus could still be a solid long-term investment without the dividend, it’s certainly key in making the stock a good buy today. Currently yielding 4.6%, Telus can provide investors with a solid stream of recurring income.
In addition, investors may see the company’s dividend income rise given Telus’ solid track record when it comes to increasing its payouts.
Bottom line Investors can earn much stronger returns by holding their cash in shares of Telus rather than in a savings account. While there will be a bit more volatility than with a savings account, investors won’t be taking on much risk in owning the stock.
A low beta combined with a strong business and good dividend makes Telus a terrific stock to add to your portfolio today.
Fool contributor David Jagielski has no position in any of the stocks mentioned.
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