Canadian Dividends Stocks: A 2022 Guide & Predictions

This article is contributed by Jeff Dawson. Jeff has over 10 years of investing background, focusing mainly on North American stocks and ETFs. Enjoy and please comment if you have any questions! 

Over the past week or so, growth stocks have seen a correction. In particular, high-risk assets like cryptocurrency along with tech stocks have been sent tumbling. This isn’t to say they won’t rebound, but one type of asset has seen no such volatility – dividend stocks.

Generally, dividend stocks are picked by value investors and those looking to buy-and-hold. It’s understandable that they’re less volatile, because they’re not factoring in decades of future income into their price and they generally have long histories of reliable dividend payouts.

Canada specifically has seen many strong dividend stocks with encouraging dividend payouts. For example, the big six Canadian banks are all expected to resume their increased dividends in 2022.

Below are the top 10 Canadian dividend stocks selected from a list of the top 32 Canadian dividend stocks.

Top 10 Canadian dividend STocks

Enbridge

Enbridge is in most investors’ list of the best performing dividend stocks. The energy company, with a $100+ billion market capitalization, is a leader within energy infrastructure. Enbridge was one of the few companies to hike up their dividends during the peak of the pandemic, with a 6.08% dividend yield. Energy prices are high, and with the potential Russian conflict in Europe, North America could be relied upon to meet European energy needs.

Bank of Nova Scotia

It was inevitable to have one of the Big Six banks included in a list of the best dividend stocks in Canada. Otherwise known as Scotiabank, the dividend yield is an impressive 4.82% which is one of the highest among the Big Six Banks. With a Beta of 0.85 and a +2.27% year change, the Bank of Nova Scotia is a solid pick in hedging the market downturn.

Fortis

Fortis is another utility stock that has seen steady growth since this time last year, an extremely low Beta of 0.10, and an attractive dividend yield of 3.4%. This is a high quality but very low risk utility stock, making it great for diversifying a portfolio. It’s 1-year change is 13.32%, with some healthy financials. Fortis provides gas and electricity to over 3 million customers around North America.

Algonquin Power & Utilities

Again, another energy company, but Algonquin Power & Utilities are a renewable utility conglomerate that has many assets dotted around North America. With reliable cash flow and high annual dividend payouts of 5.13%, the company is a great addition to almost any portfolio.

BCE

BCE is a large blue-chip telecom, providing long-term sustainable growth with a lot of near-term potential with 5G technology. BCE has such a stronghold on such a large industry that it’s a fairly safe cash cow. BCE has a +15.53% 1-year change and a low Beta of 0.33; along with a decent Earnings Per Share of 3.24. BCE’s annual dividend yield is a mighty impressive 5.38%.

Telus

Telus is another telecom giant, sitting at around 75% of the market capitalization of BCE. Telus is another safe bet, with a low Beta of 0.54, a +19.38% 1-year change, and an annual dividend yield of 4.32%. The business model is somewhat similar to BCE, so it may not be wise to overweight the portfolio with both of these companies – much of 5G’s future could impact Telus and BCE in a similar way.However, Telus is expected to consistently increase the dividend yield each year.

National Bank

NA is the sixth largest bank in Canada, with a market capitalization of $30.26bn CAD. The dividend yield has seen 12 years of growth, with it now sitting at 3.87%. Whilst it may not be larger than the other five, it has outperformed them in some areas over the past decade. NA’s 1-year change is -1.23% whilst it’s beta is 1, with it recently taking a hit, but is arguably currently more affordably priced. It’s still up around 100% in the past 3 years!

CT REIT

CT Real Estate Investment Trust is a dividend-paying stock that is owned by Canadian Tire. As we know, the Canadian property market has seen crazy price increases and high rents, and this has reflected in CT REIT’s annual dividend yield being 4.89%. With a small market capitalization than the others of $1.77bn CAD and a Beta of 1, treat CT REIT with slightly more caution.

Royal Bank

Another one of the Big Six banks, Royal Bank is on an 11-year streak of increased Dividend yields – currently sitting at 3.79% and a payout ratio of 39.42%. It’s P/E ratio is 11.24 and it focuses on wealth management, insurance and capital markets. It’s 1-year change is similar to it’s competitor National Bank, but it’s Beta is much lower at 0.77. Furthermore, it’s market capitalization is vastly bigger at $179bn CAD.

Intertape Polymer

Intertape Polymer is a package products and systems company that supplies manufacturers and retailers. Given the shift to online shopping, ITP’s expected mergers and acquisitions, along with ITP’s intention to expand internationally, we’re set for an interest few years. The past year has been a turbulent one, with a Beta of 2.1, with an annual dividend yield of 2.26% – be warned though, this recently decreased from 3%+.

Creating a Dividend Stock Portfolio

Whilst it’s tempting to look for the dogs of the TSX, we need to be realistic about how to construct our portfolio. Canadian dividend stocks are in a healthy state, and it’s not inconceivable that weighing heavily towards them will outperform the TSX – particularly during periods where growth tech stocks are facing corrections or outright bursts.

Generally, most investors will automatically reinvest their dividends if they’re holding long term positions. In a sense, they act no differently to growth stocks because there’s no free lunch – the cash paid out in dividends will be factored into the share price (i.e. less price growth). However, many of the above companies paid out dividends during the pandemic crash, and will likely do so during future crashes, making them a great option if you’re expecting a market downturn.

We shouldn’t disregard diversification, though, just because they’re safer equity investments. Equities, regardless of being large-cap dividend value stocks, will still follow the market decline during a crash. With the rising base rates and concerns over the market, bonds may be a wise option to offset these risks.

Finally, for non-Canadians, it wouldn’t be wise to over expose towards TSX stocks. Not only does the US market have a better historical growth record, but relying on Canadian stocks as a foreigner could mean taking unnecessary currency risk. Plus, if the US is going to endure more inflation, though this isn’t a certainty, then US stocks may see greater growth in accordance with this inflation, meaning that you may not want to rule out US growth stocks entirely.

Thank you all and please leave any questions or comments below!

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