In this article, we discuss 10 high-growth Canadian dividend stocks to invest in. You can skip our detailed analysis of the Canadian equity market and the performance of Canadian dividend stocks, and go directly to read 5 High-Growth Canadian Dividend Stocks to Invest In.
The recent collapse of Silicon Valley Bank (SVB) also caused Canadian stocks to plunge, with the country’s main stock index falling by 0.9% on March 13 as global investors dumped riskier investments. In 2022, the S&P/TSX Composite Index outperformed its American counterpart, falling by 8.5% as of December 30, 2022, compared with a much harsher 19% drop in the S&P 500.
Even with this outperformance, analysts are expecting the Canadian economy to contract this year. According to a report by Deloitte, a US recession will take down Canadian economic growth for three consecutive quarters, with an expected overall contraction of 0.9%. However, this recession will be relatively mild in comparison with the previous market downturns, the professional services company noted. This current stock market’s condition has called for investment in dividend equities because they can generate stable income for investors.
According to a report by RBC Global Asset Management, dividends have represented 30% of the total return from the Canadian equity market. The report also mentioned that dividends accounted for 39% of the market’s total return over the last 10 years. In the current environment, it is imperative to gauge the performance of dividend stocks relative to inflation. The report by the same capital market company highlighted that the S&P/TSX Dividends delivered an annual average return of 7.9% in the last 20 years, widely outpacing inflation which returned at an annual average rate of 2.2%.
Overall, dividend stocks in Canada have shown a strong performance in comparison to their peers. Especially companies that have raised their dividends for a significant period remained big winners. Another report published by RBC revealed that dividend growers delivered a compound annual return of 10.8% from 1986 to 2022, compared with a 9.1% return from the dividend-payers. During this period, the S&P/TSX Composite Index returned 6.2%, falling behind dividend growers by a wide margin. The report has additionally mentioned that dividend growers have displayed less volatility of 13.3% during this period, compared with a 23.4% volatility of non-dividend stocks. To enhance and diversify their portfolios, investors are advised to expand their investments in different regions. For this, readers can have a look at the 11 Most Profitable Canadian Stocks.
While famous US dividend stocks like General Mills, Inc. (NYSE:GIS), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) have grabbed investors’ attention, Canadian dividend stocks are also reliable investment options for income investors. In this article, we will discuss high-growth Canadian dividend stocks to invest in.
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Our Methodology:
For this list, we selected Canadian dividend stocks that have been paying dividends for at least ten years. From those companies, we shortlisted stocks that have a 5-year average annual dividend growth rate above 6%. The stocks are ranked in ascending order of their dividend growth rates.
10. Enbridge Inc. (NYSE:ENB)
5-Year Average Annual Dividend Growth Rate: 6.3%
Dividend Yield as of March 15: 7.32%
Enbridge Inc. (NYSE:ENB) is a Canadian multinational pipeline and energy company that operates pipelines throughout Canada and the US. In the fourth quarter of 2022, the company reported revenue of $10 billion, which showed a 2.40% growth from the same period last year. In FY22, it generated over $11.2 billion in operating cash flow, up from $9.3 billion in 2021.
Enbridge Inc. (NYSE:ENB) is one of the high-growth Canadian dividend stocks on our list as the company has raised its payouts at an annual average rate of 6.3%. Overall, the company has been paying regular dividends to shareholders for 67 years. It currently offers a quarterly dividend of $0.8875 per share and has a dividend yield of 7.32%, as of March 15. The company can be added to dividend portfolios alongside some American dividend stocks like General Mills, Inc. (NYSE:GIS), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP).
In January, National Bank raised its price target on Enbridge Inc. (NYSE:ENB) to C$56 and maintained a Sector Perform rating on the shares, highlighting the company's overall performance.
At the end of Q4 2022, 21 hedge funds tracked by Insider Monkey reported having stakes in Enbridge Inc. (NYSE:ENB), compared with 24 in the previous quarter. These stakes have a total value of over $2.6 billion. Among these hedge funds, GQG Partners was the company's leading stakeholder in Q4.
9. Royal Bank of Canada (NYSE:RY)
5-Year Average Annual Dividend Growth Rate: 6.6%
Dividend Yield as of March 15: 4.14%
Royal Bank of Canada (NYSE:RY) is a Toronto-based multinational financial services company and one of the largest banks in the country. In February, Desjardins raised its price target on the stock to C$147 and maintained a Buy rating on the shares, highlighting the company's outperformance.
On March 1, Royal Bank of Canada (NYSE:RY) declared a quarterly dividend of C$1.32 per share, which fell in line with its previous dividend. The company has raised its dividends consistently since 2012, which makes it one of the high-growth Canadian dividend stocks. Moreover, its 5-year average annual dividend growth rate stands at 6.6%. The stock has a dividend yield of 4.14%, as of March 15.
In fiscal Q1 2023, Royal Bank of Canada (NYSE:RY) reported revenue of C$15.09 billion, up 15.5% growth from the same period last year. The company paid nearly $1.8 billion in dividends to shareholders during the quarter.
The number of hedge funds tracked by Insider Monkey owning stakes in Royal Bank of Canada (NYSE:RY) grew to 17 in Q4 2022, from 14 in the previous quarter. The collective value of these stakes is over $147.2 million.
8. TELUS Corporation (NYSE:TU)
5-Year Average Annual Dividend Growth Rate: 6.7%
Dividend Yield as of March 15: 5.29%
TELUS Corporation (NYSE:TU) is a telecommunications company, based in Vancouver, Canada. The company provides a wide range of related services and products to its consumers. The company has had a run of paying regular dividends to shareholders since 2004 and has raised its payouts at an annual average rate of 6.7% in the past five years. The company offers a quarterly dividend of C$0.3511 per share and has a dividend yield of 5.29%, as recorded on March 15.
Following the company's recent quarterly earnings, JPMorgan maintained an Overweight rating on the shares with a C$33 price target.
In the fourth quarter of 2022, TELUS Corporation (NYSE:TU) reported revenue of C$5 billion, which was up by 4% from the same period last year. The company's free cash flow grew by 64% in FY22 to $1.3 billion, which shows that the company's cash position is strong.
At the end of December 2022, 17 hedge funds in Insider Monkey's database owned stakes in TELUS Corporation (NYSE:TU), worth over $255 million collectively. With over 3.5 million shares, Schonfeld Strategic Advisors was the company's leading stakeholder in Q4.
7. The Toronto-Dominion Bank (NYSE:TD)
5-Year Average Annual Dividend Growth Rate: 7.98%
Dividend Yield as of March 15: 4.86%
The Toronto-Dominion Bank (NYSE:TD) is a multinational banking and financial services company that offers a wide range of banking services to its consumers. Scotiabank upgraded the stock to Outperform in March with a C$104 price target, appreciating the company's earnings.
The Toronto-Dominion Bank (NYSE:TD), one of the high-growth Canadian dividend stocks on our list, has been raising its dividends consistently for the past eight years. Its 5-year average dividend growth rate stands at 7.98%. The company currently offers a quarterly dividend of C$0.96 per share for a dividend yield of 4.86%, as of March 15.
In fiscal Q1 2023, The Toronto-Dominion Bank (NYSE:TD) reported revenue of C$13 billion, which showed a 16% growth from the same period last year. The company's net income for the quarter came in at over C$1.58 billion.
At the end of the December quarter of 2022, 17 hedge funds in Insider Monkey's database reported owning stakes in The Toronto-Dominion Bank (NYSE:TD), compared with 22 in the previous quarter. These stakes have a consolidated value of over $185.6 million.
6. Sun Life Financial Inc. (NYSE:SLF)
5-Year Average Annual Dividend Growth Rate: 9.19%
Dividend Yield as of March 15: 4.74%
Another high-growth Canadian dividend stock on our list is Sun Life Financial Inc. (NYSE:SLF), which is a financial services company in Canada. The company mainly specializes in insurance-centric services for its consumers. The company currently pays a quarterly dividend of C$0.72 per share and has a dividend yield of 4.74%, as of March 15. It has grown its payouts at an annual average rate of 9.19% in the past five years.
General Mills, Inc. (NYSE:GIS), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some other popular dividend stocks that are grabbing investors' attention.
In the fourth quarter of 2022, Sun Life Financial Inc. (NYSE:SLF) posted an EPS of C$1.69, which beat Street estimates by C$0.16. At the end of December 2022, the company had approximately $423 million available in cash and cash equivalents. In FY22, it returned over $1.6 billion to shareholders in dividends.
In February, Barclays raised its price target on Sun Life Financial Inc. (NYSE:SLF) to C$76 with an Overweight rating on the shares.
As of the close of Q4 2022, 9 hedge funds tracked by Insider Monkey reported having stakes in Sun Life Financial Inc. (NYSE:SLF), with a total value of over $225.4 million.
Click to continue reading and see 5 High-Growth Canadian Dividend Stocks to Invest In.
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Disclosure. None.10 High-Growth Canadian Dividend Stocks to Invest Inis originally published on Insider Monkey.
As a seasoned financial expert with a deep understanding of the Canadian equity market and a broad knowledge of dividend investing, let me break down the concepts and key information presented in the article about 10 high-growth Canadian dividend stocks.
Overview of the Canadian Equity Market:
The article discusses the recent collapse of Silicon Valley Bank (SVB) and its impact on Canadian stocks. It notes that the S&P/TSX Composite Index outperformed the S&P 500 in 2022, falling by 8.5% compared to a 19% drop in the S&P 500. Despite this outperformance, there are concerns about a potential contraction in the Canadian economy due to a projected US recession.
Rationale for Investing in Dividend Stocks:
The current market conditions have led to a focus on dividend equities as a means to generate stable income for investors. According to a report by RBC Global Asset Management, dividends have historically represented a significant portion of the total return from the Canadian equity market, accounting for 30% of the total return. The article highlights the importance of assessing the performance of dividend stocks relative to inflation.
Historical Performance of Dividend Stocks in Canada:
The S&P/TSX Dividends are cited as delivering an annual average return of 7.9% over the last 20 years, outpacing inflation, which returned at an annual average rate of 2.2%. Another report from RBC emphasizes the strong performance of dividend growers, indicating a compound annual return of 10.8% from 1986 to 2022, surpassing dividend-payers and the S&P/TSX Composite Index.
Criteria for Selecting Dividend Stocks:
The article outlines the methodology used for selecting the high-growth Canadian dividend stocks. The criteria include companies that have been paying dividends for at least ten years and have a 5-year average annual dividend growth rate above 6%. The selected stocks are then ranked in ascending order of their dividend growth rates.
Featured Canadian Dividend Stocks:
10. Enbridge Inc. (NYSE: ENB)
- 5-Year Average Annual Dividend Growth Rate: 6.3%
- Dividend Yield: 7.32%
- Business: Canadian multinational pipeline and energy company.
- Financials: Revenue of $10 billion in Q4 2022, 67 years of regular dividend payments.
9. Royal Bank of Canada (NYSE: RY)
- 5-Year Average Annual Dividend Growth Rate: 6.6%
- Dividend Yield: 4.14%
- Business: Toronto-based multinational financial services company.
- Financials: Revenue of C$15.09 billion in fiscal Q1 2023, consistent dividend growth since 2012.
8. TELUS Corporation (NYSE: TU)
- 5-Year Average Annual Dividend Growth Rate: 6.7%
- Dividend Yield: 5.29%
- Business: Telecommunications company based in Vancouver.
- Financials: Revenue of C$5 billion in Q4 2022, regular dividends since 2004.
7. The Toronto-Dominion Bank (NYSE: TD)
- 5-Year Average Annual Dividend Growth Rate: 7.98%
- Dividend Yield: 4.86%
- Business: Multinational banking and financial services company.
- Financials: Revenue of C$13 billion in fiscal Q1 2023, consistent dividend growth for eight years.
6. Sun Life Financial Inc. (NYSE: SLF)
- 5-Year Average Annual Dividend Growth Rate: 9.19%
- Dividend Yield: 4.74%
- Business: Financial services company specializing in insurance.
- Financials: EPS of C$1.69 in Q4 2022, quarterly dividend of C$0.72 per share.
Conclusion:
The article recommends these high-growth Canadian dividend stocks as reliable options for income investors based on their historical performance and consistent dividend growth. The mentioned stocks have demonstrated stability, financial strength, and a commitment to returning value to shareholders. Investors are advised to consider diversifying their portfolios by exploring these opportunities in the Canadian market.
