3 Top Dividend Stocks For January 2020

Summary

  • 13 authors chose 1 top stock each for January 2020.
  • If I were to choose 3 top stocks from the group, I’d consider Enbridge, Suncor, and Stella-Jones.

Thirteen contributors at Motley Fool Canada put together a list of top Canadian stocks for January 2020. If I were to choose three top stocks from the list, it’d be Enbridge (TSX:ENB)(NYSE:ENB), Suncor Energy (TSX:SU)(NYSE:SU), and Stella-Jones (TSX:SJ).

Enbridge

Enbridge is a great income stock. If you’re looking to stash away some cash for at least five years, consider picking up some shares for a juicy yield of about 6.3%. This is way better than the interest income provided by GICs or CDs. 

A dividend growth streak of 24 years with a three-year dividend growth rate of 11.7% puts Enbridge at the top of the list for safe dividends. Although the leading North American energy infrastructure company will experience slower growth compared to the last 20 years, it will still make a decent investment with its big yield and stable growth profile. 

Enbridge anticipates growing its distributable cash flow by 5-7% over the next few years. So, it’s logical to anticipate dividend growth of about 5% per year in the foreseeable future.

The difference from Enbridge common stock and GICs or CDs, of course, is that Enbridge comes with greater volatility. That’s why investors must have a long-term investment horizon if they’re considering Enbridge. The yield on cost can grow to 8% in five years assuming a 5% dividend growth rate!

Suncor

Suncor’s integrated business allows it to stay profitable through business cycles. That’s why it has increased its dividend for 17 consecutive years. 

In the trailing 12 months, Suncor generated more than $6 billion of free cash flow, and it only paid out about 40% of it as dividends. So, there’s more than enough buffer for its dividend.

Suncor only yields 3.9%, which is a smaller yield compared to Enbridge. However, it offers greater upside potential than Enbridge. Specifically, Suncor stock has about 17% near-term upside potential.

Stella-Jones

Both stocks of Enbridge and Suncor had run up in the last few months but not Stella-Jones, which is an entirely different kind of company. It makes pressure-treated wood products, such as railway ties and utility poles needed by railroad operators, utilities, and telecoms. Providing residential lumber is a part of what it does, too.

The stock has corrected about 21% from about six months ago, as there has been a change in management. Previous CEO Brian McManus retired. He assisted the company to deliver glorious returns of about 27% per year over 18 years. 

The investment community has yet to see what the new CEO, Éric Vachon can do. Because of this uncertainty, the stock has retreated to a better valuation level that’s worth considering for the purchase of some shares. 

At $37.22 per share as of writing, SJ stock trades at about 16 times earnings. Vachon has been working at Stella-Jones for 12 years and was previously Senior Vice President and CFO of the company. 

Analysts have an average 12-month price target of $48 on the stock for 29% near-term upside potential. 

Stella-Jones has a dividend-growth streak of 15 years with a three-year dividend growth rate of 11.9%. It yields 1.5%. It’d be interesting to see how much Stella-Jones will increase its dividend in March.

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Disclosure: As of writing, we’re long on the TSX: ENB and SJ.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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