This article is not about the 10 hottest Canadian dividend stocks today, but the Top 10 Best Canadian Dividend Stocks for the NEXT DECADE. The idea was to give you ten companies that should do well for a very long time. We believe these stocks will outperform the overall market and their dividend peers. This is not meant to constitute a portfolio by itself. We picked three banks for our top 10 and we might have not taken that many for a portfolio.
How the Best Canadian Dividend Stocks Were Chosen
In order to start our selection, we went into our existing Canadian portfolios. We look at which companies we would be comfortable holding for ten years. We considered their current metrics including sales, earnings and dividend growth over three years and five years along with their dividend yield, dividend payout ratio and P/E ratio as we didn’t want to buy something at a very high price.
Our focus was more on potential future growth than existing dividend yield. For example, we preferred selecting Telus (TSE:T, NYSE:TU) instead of BCE (TSE:BCE, NYSE:BCE) even though the BCE dividend yield is higher. The growth of the company was more important than its dividend growth as well. Please note that this top 10 is in no particular order.
The 10 Best Canadian Dividend Stocks for the Next Decade
Telus (TSE: T, NYSE: TU)
DSR RANKING: 65
Telus offers residential phone, internet, TV and mobile phone services. Back in 2008, Telus also bought Emergis, a leading electronic healthcare solutions provider and then created Telus Health Solutions. Considering the number of wireless subscribers, Telus is the 3rd largest provider in Canada. Interesting enough, T gets 49% of its revenue from Wireline and 51% from Wireless.
Telus continues to outperform its peers and the stock market year after year. The best part is that T is doing this while continuing to increase its dividend year after year. It went from $0.24/share in 2009 to $0.36/share in 2014. Now that Verizon (VZ) has dropped its idea of conquering Canada’s telecom market in 2013, the sky is blue and the road is open for Telus to continue to grow. There is still a lot of room in Ontario and Quebec for this company to raise its profit in the upcoming years.
National Bank (TSE : NA)
DSR SCORE: 87.5
National Bank is the 6th largest bank in Canada. It provides various financial services to individual, commercial and institutional clients. Their services range from regular banking, investment advice, insurance, brokerage, mortgages, loans, etc. NA is considered more as a regional bank with a leadership position in the province of Quebec.
National Bank has been able to keep its main market (Quebec) out of its competitors’ reach so far. It has established an important market share among high net worth clients through the creation of Private Wealth 1859 and several acquisitions. Their trading division is also profitable. NA has made several acquisitions over the past five years (HSBC brokers, Montrusco clients, TD Waterhouse clearing, Wellington West, etc.) and is still hungry for more. Since it has a lower P/E ratio than other banks, there is still room for improvement as investors realize it’s not just the small Québécois bank anymore.
TD Bank (TSE :TD, NYSE :TD)
DSR SCORE: 94
Based out of Toronto, Ontario, Canada, TD is becoming increasingly multi-national. The four main branches of the company are Canadian Personal and Commercial Banking, Wealth management, Wholesale Banking (securities), and U.S. Personal and Commercial Banking. TD has about $630 billion dollars in assets. For that reason, TD is now on RBC’s radar as it going for the #1 spot for the biggest bank in Canada.
On top of being a leader in Canada, TD is also the most productive Canadian Bank (e.g. more earnings relative to its risk-weighted assets). Its earnings volatility is lower than its peers due to less exposition to capital markets. Finally, TD has deployed a very lean structure into its branches which benefits greatly from their expansion in Quebec and the US. TD Bank it is now known as “America’s Most Convenient Bank”. TD has recently beat analysts’ estimates once again. Their lean structure gives them one of the best customer service rankings across Canada.
Royal Bank (TSE:RY, NYSE: RY)
DSR SCORE: 79.5
Royal Bank is the largest bank in Canada in asset base. It provides various financial services to individuals as well as commercial and institutional clients. Their services range from regular banking, investments, insurance, brokerage, mortgages, loans, etc. RY has been quite active in the USA since 2008 in order to increase its profits.
The Royal surprised with their earnings in 2012 and played the same trick in 2013. It has increased its dividend twice in 2013 and continues this streak for 2014. It is now hitting Quebec as one of its targets for 2014 in order to grow its market share. Like TD, RY has beat analysts’ estimates and continues to grow at a steady pace.
Black Diamond Group (TSE:BDI)
DSR SCORE: 72
Black Diamond Group rents modular structures to provide services and camps for temporary workforces and work structures. Black Diamond also offers a wide variety of oilfield accommodation equipment. Their services go from temporary offices to full-service lodging. Their slogan makes me smile: “We were HERE before HERE was HERE”. Their main market is obviously Western Canada.
Black Diamond focuses on predictable and recurring cash flows from long term projects. The company is showing high speed growth both in terms of sales and profits. It keeps a relatively high dividend growth policy at the same time as ensuring sales growth. BDI is not limited to oil sand exploitation and seeks to grow its business in the USA as well. Their fleet size is continuously increasing but its % utilization remains over 80%.
DSR SCORE: 75.5
Emera is an energy and service company. Emera’s main market is Nova Scotia as it owns Nova Scotia Power, the province’s main electricity provider. Emera actually owns power plants and distributes natural gas in Canada, the USA and the Caribbean. It is actively developing more energy projects in Eastern Canada.
Emera is pretty much alone in its main market which provides a very good income flow year after year. As long as EMA is using this cash flow to generate more projects, we should see consistent sales growth. Notably, 2 projects (a participation in Maritime Link and an undersea power cable) should be under operation for 2017. The future looks bright for EMA as it shows several projects for the next decade.
WSP Global (TSE:WSP, NYSE:WH)
DSR SCORE: 57
WSP Global was previously known as Genivar until January 2014. WSP Global Inc. is a professional services firm, working with governments, businesses, architects and planners providing integrated solutions across many disciplines. Genivar was stuck in the corruption investigation with the city of Montreal in 2013. This is one of the reasons why they change their name to start on a clean slate.
With a dividend yield near 4% and a payout ratio around 60%, this Canadian engineering firm is in a very good position to show additional growth in the future. After a dip in earnings and income in 2013 (due to the investigation, losing several contracts), they are back on track with a better 2014. There are several infrastructure projects coming due in the upcoming years and WSP Global will definitely have its share of the pie.
Corus (TSE: CRJ.B)
DSR SCORE: 57
Corus is an entertainment company that was originally part of the telecommunications giant Shaw Communications (SJR.B). It is probably most well-known for offering a variety of speciality programming channels that include such diverse offerings as the Teletoon cartoon network and the famous HBO channel. Corus also owns 37 of the most popular radio stations across Canada.
Now that Astral Media has been bought by BCE, Corus remains a very interesting player to be bought by BCE competitors. The taste for speciality chains is increasing and Corus is definitely a strong player in this area. I like the fact that Corus is paying a monthly dividend. This is a great pick for retirees looking for a stable income.
Riocan Real Estate (TSE: REI.UN)
DSR SCORE: 63.5
RioCan is Canada’s largest real estate investment trust with a total capitalization of approximately $14.5 billion as at March 31, 2014. It owns and manages Canada’s largest portfolio of shopping centres with ownership interests in a portfolio of 340 retail properties, including 16 under development, containing approximately 82 million square feet including 47 grocery anchored and new format retail centres containing 13 million square feet in the United States at March 31, 2014.
The fact that 86% of their revenues are generated by national and anchor tenants (such as Canadian Tire, Wal-Mart, Target, Loblaws, Metro, etc.) makes Riocan the best REIT in Canada in my opinion. With a 5%+ dividend yield, it’s hard to find a better investment for someone looking for a stable income! Since 2003, their occupancy rate is over 96%, therefore, it’s been 10 years that they are almost sold out!
Gluskin & Sheff (TSE:GS)
DSR SCORE : 53
Gluskin Sheff + Associates is one of the first Canadian private wealth management to be founded. GS manages investment portfolios for high net worth clients as well as institutional investors, foundations and municipalities. They claim to be “Stubbornly unconventional”. Founded in 1984 by Ira Gluskin and Gerald Sheff and 24 other private clients, the company is still owned at 26% by senior management and employees.
The stock surged in 2013 offering a return over 70% + dividend. They recently declared a special dividend in September of $1.40 per share. This represents about 5% dividend yield with this payment alone. The company evolves in a highly profitable market and has become appealing for other big players for a takeover. I also like the fact that private clients tend to be more loyal the than average. The 2013 numbers were very interesting and if the company continues to post such results, you can bet on another great year on the market. My bet, as you know already, is that it will be bought out in the future. The thing is that I don’t know when it will happen so this is why I took it in my best Canadian dividend stocks to hold for the moment. In the meantime, the private wealth company shows great upside potential in this bullish market.
What is the DSR Score Below Each Stock?
The DSR Score comes from our exclusive DSR Stock Ranking Model. This is not an ordinary ranking where we arbitrary apply a score to dividend stocks. We actually build a dividend growth modelwhere several metrics are accounted for in the score calculation. We started by listing the most important metrics we follow before buying a stock. This is a highly complex dividend growth model where various factors are weighted to create the score. Our model seeks a balance between growth, profitability, leverage, value and dividend payouts. The best score is technically 100 while a stock can even show a negative score (yes, we apply penalties for negative numbers in our model).
The DSR Stock Ranking Model covers over 400 companies on both American and Canadian market.
DSR Ranking is available for members only…
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