Receiving dividends is like collecting interest on money in a bank account. The growth is slow, but it is steady. You can sit back and watch the money trickle in. That’s why investors call it passive income.
Income investors like consistency, and dividend investing provides that. A company that pays a $1 annual dividend is likely to pay $1 or more the next year. Companies try to match or increase their annual dividend so investors feel confident in the company. Confident investors are more likely to reinvest their dividends and add more shares.
Dividend investing is like the tortoise, not the hare. It requires a long time to be more effective. The longer you can play out a dividend investing strategy, the more fruitful it’ll be. That’s why it is important to invest in stable companies that will be relevant years down the road. Certain sectors are more stable than others.
The Canadian market is heavily tied to the energy and commodities sector, which are both stable. For the sake of diversification, I have selected a company from each of the following sectors: energy, telecom, financial and utilities. Without further ado, here are the top 4 Canadian dividend stocks for 2019.
Suncor Energy – 3.2% yield
Suncor Energy (NYSE: SU) may be the most popular NYSE-listed Canadian based company at the moment. Warren Buffett recently acquired a stake of the energy company. Suncor specializes in producing synthetic crude from oil sands. The company operates across every step of the process from resource extraction, upgrading, refining, and marketing. This holistic presence boosts their defense against price volatility in the energy sector. With a market cap around $52 billion, Suncor is one of the largest energy companies in the world and the largest oil producer in Canada. Last year they ranked 215 on the Forbes Global 2000 list.
Suncor is trading at $33 USD per share. On February 5th the company’s board of directors approved a quarterly dividend $0.42 per share. The dividend hike represents a 17% increase over the previous quarter’s dividend. It is also the 17th year of consecutive annualized dividend increases. Expect Suncor to continue their reliable dividend.
Telus – 4.3% yield
Telus (NYSE: TU) is one of the biggest telecommunications companies in Canada, and the biggest in British Columbia and Alberta. They offer a wide range of services including internet access, voice, entertainment, healthcare, video, and television. They receive $13.3 billion (CAD) in annual revenue from their 13.1 million subscribers. Wireless customers make up largest portion of those subscribers at 8.9 million.
Telus is trading at $37 USDper share. On March 11th the company’s board of directors approved a quarterly dividend of $0.41 per share. Their annual dividend in 2014 was $1.14. It climbed to $1.57 in 2018 which is a 38% increase. Telus should continue their exceptional growth.
TD bank – 3.4% yield
Toronto-Dominion Bank (NYSE: TD) is Canada’s second biggest bank. Operating in 15 states and Washington DC, TD is now one of the top 10 retail banks in the United States. TD’s profitability is unmatched. They reported a net income of $1.79 billion through Q1 which is a 2.4% increase from last year.
TD is trading at $56 USD per share at the moment. They have a dividend of $0.22 per share, and many analysts believe that it will increase. The Canadian bank has increased its dividend eight consecutive years. TD has increased its annual dividend by 11% a year, from $0.25 in 1998 to $2.01 in 2018. Future dividend growth will depend on increased earnings and the payout ratio. With a current payout ratio of 33% TD’s board of directors has room to increase the dividend in the future.
Waste Connections – 0.7% yield
Waste Connections (NYSE: WCN) is an integrated waste services company that provides solid waste collection, transfer, disposal, and recycling services. They operate in Canada and the United States. Waste Connections has reported a 422% return over the last 10 years. They outperformed S&P 500 over that time.
Lately, Waste Connections has been one of the hottest dividend growth stocks. Over the past five years, their free cash flow has gone from $300 million to close to $900 million. That massive increase has allowed Waste Connections to grow their dividend. They have eight consecutive years of annual dividend increases. On February 13th the board of directors declared a $0.16 dividend per share. Waste Connections’ massive free cash flow should allow them to continue paying dividends.
These top 4 Canadian dividend stocks could perform very well in 2019. They might be a great addition to any portfolio.
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Good investing,
Peter
