Category Archives: Dividend Ideas

How to Better Invest Your Money

Some people like the security of their principal and guaranteed returns from Guaranteed Investment Certificates (GICs), which are equivalent to Certificate of Deposits (CDs) in the U.S.

Currently, a five-year term results in an interest rate of about 3%. That’s roughly keeping pace with the long-term inflation rate. So, people are able to maintain their purchasing power that way.

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Invest in the stock market

Investing in the stock market, investors can get markedly better returns. After all, the long-term average stock market returns are about 10% in the United States. The Canadian stock market tends to underperform due to the large exposure to the energy sector.

The simplest way would be to buy periodically in a market-wide fund, such as the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). For example, if you can save $200 every month for investing, you can invest $1,000 every five months to invest for the long run.

Invest in dividend stocks

For people who’re interested in investing, going with proven businesses that pay dividends is a great way to start. By buying these stocks when they’re relatively cheap, it’s entirely possible to get returns of more than 10% per year in the long haul.

The Big 3 Canadian banks are proven businesses with stable growth. Among the three, both Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are trading at modest discounts. According to the analyst consensus from Thomson Reuters, both stocks have 12-month upside potential of more than 11%.

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This is One of the Biggest Safe Dividends You Can Get

Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) just increased its cash distribution by 5.1% to an annualized payout of US$2.06 per unit. That implies a yield of 7% at US$29.29 per unit. 

A Sustainable Dividend

In 2018, it increased its funds from operations (“FFO”) per unit by nearly 14%, resulting in a payout ratio of <91% for the year, which was a meaningful improvement from 2017’s payout ratio of 98%. The lower payout ratio makes a safer dividend.

Management aims for cash distribution growth of 5-9% per year in the stock. It’s conservative to assume a cash distribution growth rate of 5% because, since 2011, its distribution has compounded at a growth rate of 5.4%.

Hydroelectric generation
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4 Stocks for Safe Dividend Income

Generally, dividend-growth stocks are a conservative way to invest in the stock market. Typically, they’re mature companies that generate sufficient earnings or cash flows to pay a generous dividend and maintain and grow the business.

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This Telecom offers a growing dividend

It’s been a long time since TELUS (TSX:T)(NYSE:TU), the third-largest Canadian telecom has hit my minimum yield target of 4.7%.

The dividend is safe, and the stock is reasonably valued — not a bargain and not excessively expensive. At ~CAD$46 per share, TELUS trades at a P/E of ~16, while it’s estimated to increase its earnings per share (“EPS”) by 6.5-7.1% per year over the next 3-5 years.

Source: FAST Graphs

At current levels, TELUS can deliver 8-11% per year on average over 3-5 years.

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