3 Dividend Champions You Should Buy Instead of Rental Property

Telus Corporation (TSX:T)(NYSE:TU), TransCanada Corporation (TSX:TRP)(NYSE:TRP), and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) can all provide income without the hassle of being a landlord.

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If you’ve built up some substantial savings and want to earn some money from it, no doubt you’ve thought about buying some property and renting it out. But this comes with problems.

There are fees and commissions that must be paid to agents. There’s the hassle of finding the right property and tenants. There’s even more hassle if your tenants run into financial trouble. And with real estate prices at all-time highs in so many regions, you’ll have difficulty earning a decent yield.

You’re better off saving yourself all that trouble and buying some nice reliable dividend-paying stocks. Below are three worth considering.

1. Telus

If you’re looking for reliable dividend payers, then Canada’s big three telecommunications providers are a great place to start. They provide an essential service, make money from subscriptions, and best of all, face very limited competition. As a result, profits are very consistent, perfect for paying a nice dividend.

And of the three players, Telus (TSX: T)(NYSE: TU) has been doing the best job recently. It has been winning more customers than its rivals, and has been keeping them happier too. As a result, it has been growing earnings faster than its rivals as well.

Best of all, Telus has been a dividend champion for years, having increased its payout by 400% over the past 10 years. And with a yield of 3.8%, this company starts to look a lot more attractive than rent cheques.

2. TransCanada

Like Telus, TransCanada (TSX: TRP)(NYSE: TRP) operates an essential service: delivering energy. TransCanada has some other nice advantages – for example, its infrastructure earns money based on very long-term contracts, which ensures that income is smooth.

Right now, there is a lot of concern about the company’s Keystone XL pipeline, which has been awaiting U.S. approval since 2008. But Keystone is just a small portion of the company’s $38 billion in commercially secured projects.

As of this writing, TransCanada has a dividend yield of 3.2%, but this company’s payout has been shown to rise very consistently – since 2000, the dividend has been raised every year, by 7% on average.

3. Canadian National Railway Company

At first, Canadian National Railway Company (TSX: CNR)(NYSE: CNI) may look out of place on this list. After all, its dividend only yields 1.2%. But CN Rail still has the characteristics that dividend investors should be looking for.

More specifically, CN Rail may be more immune to competition than any other company in Canada. Its track network cannot be replicated, meaning that it is often the only option for many of its customers. And as long as we still need goods shipped (i.e. forever), CN will continue to churn out plenty of earnings.

Compare this to the prospect of rental property, where tenants can run into trouble, or real estate prices could go down, or the property could get damaged.


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

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