Whether you just opened your first brokerage account or have been investing for years, you must own at least one dividend-paying stock, because they outperform non-dividend-paying stocks over the long term. With this in mind, I scoured the market and selected one large cap, one mid cap, and one small cap that have high and safe yields of 4-8%, so let’s take a quick look at each to determine which would fit best in your portfolio.
Large cap: Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS)(NYSE: BNS) is the third-largest bank in Canada with about $920 billion in total assets. It pays a quarterly dividend of $0.72 per share, or $2.88 per share annually, which gives its stock a yield of about 4.7% at today’s levels.
Investors must also make two notes.
First, Bank of Nova Scotia has raised its annual dividend payment for five consecutive years, and its recent hikes, including its 2.9% hike in March, have it on pace for 2016 to mark the sixth consecutive year with an increase.
Second, the company has a target dividend-payout range of 40-50% of its net earnings, so I think its consistent earnings growth, including its 5.9% year-over-year increase to $1.43 per share in its first quarter of fiscal 2016, and its growing asset base will allow its streak of annual dividend increases to continue for the foreseeable future.
Mid cap: Canadian Apartment Properties REIT
Canadian Apartment Properties REIT (TSX: CAR.UN) is Canada’s largest publicly traded residential landlord, serving over 46,700 families from coast to coast. It pays a monthly distribution of $0.10166 per share, or $1.22 per share annually, which gives its stock a yield of about 4.2% at today’s levels.
Investors must also make two notes.
First, Canadian Apartment Properties has raised its annual distribution for four consecutive years, and its 3.4% hike in May 2015 has it on pace for 2016 to mark the fifth consecutive year with an increase.
Second, I think the company’s streak of annual distribution increases can continue for the next several years for the following three reasons:
- Its normalized funds from operations increased 1% to a record $1.692 per share in fiscal 2015
- Its payout ratio was 73.1% in fiscal 2015, which is at the low end of its target range of 70-80%
- Its growing asset base, including its 12.2% year-over-year increase in the number of residential suites and sites to 46,790 in fiscal 2015, sets it up for another record financial performance in 2016
Small cap: Rogers Sugar Inc.
Rogers Sugar Inc. (TSX: RSI) is one of Canada’s largest refiners, processors, distributors, and marketers of sugar products, including granulated, icing, cube, yellow, brown, liquid, and specialty sugars, as well as syrups. It pays a quarterly dividend of $0.09 per share, or $0.36 per share annually, which gives its stock a yield of about 7.4% at today’s levels.
Investors must also make two notes.
First, Rogers has maintained its current annual dividend rate since 2013.
Second, I think the company’s ample free cash flow generation, including the $37.8 million it generated in fiscal 2015 and the $14.5 million it generated in its first quarter of fiscal 2016, will allow it to continue to maintain its current annual dividend rate going forward.
