Category Archives: Dividend Investing

Do Utilities Make Good Buy-and-Hold Dividend Stocks?

Utilities are a key component of solid dividend portfolios. Here are 3 utilities that provide current yields of about 3.5-4.4%. They’re fairly valued. Going through these examples will lead to an answer for the question in the title.

electric distribution

Brookfield Infrastructure

Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) split-adjusted funds from operations per unit (“FFOPU”) increased by 2% in 2020 during the pandemic, proving itself to be a defensive business in the face of adversity.

In the first half of the year (“H1”), BIP rebounded to growth with its split-adjusted FFOPU rising almost 19% to US$1.77. Contributing factors include an economic rebound, management taking advantage of market volatility during the 2020 pandemic market crash (such as by scooping up shares of Inter Pipeline (TSX:IPL) at basement prices), capital recycling, etc. Its H1 2021 payout ratio was 58% of FFO, which is a healthy payout ratio.

BIP remains one of our favourite utilities for income. We trust that management can live up to its word by increasing its cash distribution by 5-9% per year going forward. 

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1 Top Canadian REIT that Yields 4% to Buy Now

I was absolutely thrilled to find out about Canadian Net REIT (TSXV:NET) around April this year, which is about when I started buying the quality real estate investment trust (REIT) in my Tax-Free Savings Account (TFSA). You might know the company, which is formerly known as Fronsac REIT (TSXV:FRO.UN).

I found the top-notch dividend stock when I was going through the Canadian Dividend All-Star List — you can obtain the latest version here. Just to be clear, I’m not affiliated with that website in any way. The author explains the list as “a free spreadsheet with an abundance of useful dividend screening information on Canadian companies that have increased their dividend for five or more years in a row.”

I haven’t found any similar company as Canadian Net REIT on the Canadian exchanges (yet). There are bigger versions of it on the NYSE though, including Realty Income (NYSE:O) and the like.

bananas in grocery store
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5 Canadian Dividend Stocks with Incredible Dividend Growth

The Canadian Dividend Aristocrat list is a good place to explore prospective dividend stocks for buying. There are dividend stocks that grow their dividends at an incredible pace. Ideally, we aim to focus on dividend stocks with long-term growth trends.

Typically, the longer the dividend growth streak of a dividend stock, the better. But you’ve got to investigate its business and determine if more above-average growth is coming. And make sure you pay a reasonable multiple for the stock.

grow dividends

You can observe the one- and three-year dividend growth rates (DGR) to get an idea of recent dividend increases. Also, look at the five- and 10-year DGR. The 10-year rate will likely include a recession, which provides a glimpse of how resilient the business might be during tough economic times. Dig into the year(s) of recession for the real resilience of the business.

Here are some of the top Canadian Dividend Aristocrats with incredible five-year DGR. Stocks with high dividend growth tend to have small yields. (Typically, you would find blue-chip Canadian dividend-growth stocks growing dividends in the 5-7%. It would be amazing to find one growing its dividend at 10%.)

Dividend stockDG streak5-year DGRRecent Yield
goeasy (TSX:GSY)635.1%1.6%
Agnico Eagle Mines (TSX:AEM)(NYSE:AEM)524.3%2.3%
Savaria (TSX:SIS)822.4%2.4%
Canadian Pacific Railway (TSX:CP)(NYSE:CP)520.5%0.8%
Enghouse Systems (TSX:ENGH)1419.1%1.1%

Source: Data for DG streak and 5-year DGR columns are from the Canadian Dividend All-Star list. Data for Recent Yield column is from Yahoo Finance.

We believe by going through many examples, investors can better identify the type of dividend stocks to invest in for long-term buy and hold or potentially sizing a position accordingly for trading. Here are five dividend stock examples.

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