Stock returns have been lousy lately, but you already know that.
Why they’ve been lousy is important. And while there are many reasons, the biggest fear is that the doldrums in Alberta’s oil patch will slow growth throughout the rest of Canada.
And there’s good reason to think it will. With consumer spending hindered by debt and the Federal government trying to trim budget deficits, forecasts for economic growth have relied on strong oil prices. But with Canadian crude falling below US$30 per barrel, those outlooks now look questionable at best.
So, if business stalls, what should you do with your portfolio? You could do worse than bet on dividends. The idea is that if stock price gains remain muted for the foreseeable future, dividends will still carry you along with respectable returns.
The good news is that the recent market turmoil has turned some blue-chip names into cash cows. Let’s have a look at the top yielding stocks in the S&P/TSX 60 index.
| Company | Market Cap | Yield |
| Crescent Point Energy Corp. | $13.4B | 9.2% |
| TransAlta Corporation | $3.2B | 6.2% |
| ARC Resources Ltd. | $7.7B | 5.3% |
| Cenovus Energy Inc. | $19.0B | 4.9% |
| BCE Inc. | $45.2B | 4.8% |
| Teck Resources Ltd. | $10.9B | 4.8% |
| Potash/Corp. Saskatchewan | $33.9B | 4.7% |
| Husky Energy Inc. | $25.7B | 4.6% |
| Canadian Imperial Bank of Commerce | $36.5B | 4.6% |
| Inter Pipeline Ltd. | $10.8B | 4.6% |
Source: Yahoo! Finance
Of course, this is not a formal list of buy recommendations. However, it’s a good place to start your research. Let’s say a few words about these companies.
The Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) churns out some of the most reliable dividends around. However, the company is looked down upon because it works in a mature industry. Everyone knows future earnings growth will be meager at best.
Then again, when you see a stock paying out nearly 5%, no one should expect much in the way of earnings growth. But with a yield like this, shareholders who sit around reinvesting their dividends will easily beat most other investors over the next 20 or 30 years. It’s a wonderful thing to watch.
The story is straightforward with TransAlta Corporation (TSX:TA): It’s a giant utility serving millions of customers. Customers turn their lights on and you get paid; stable, simple, profitable. And given that the payout on a 10-year bond is only 1.3%, TransAlta’s 6.2% yield sure looks attractive.
Inter Pipeline Ltd. (TSX:IPL) is another boring dividend stock. The company owns energy pipelines, terminals, and processing facilities across western Canada. Unlike most energy stocks that need expensive oil to make a profit, Inter Pipeline charges a fee on every barrel of crude that flows through its network.
Sure, oil prices can swing wildly from day to day, but the total volume of crude remains remarkably consistent. As a result, Inter Pipeline’s profits are steady like bond coupons.
