3 Great Dividend Stocks, 3 Different Sectors

While it’s tempting to go with Royal Bank of Canada (TSX:RY)(NYSE:RY) and some other big hitters on the TSX, these three dividend-paying stocks from three different sectors, along with a wildcard, will get you where you need to go.

| More on:

Many experts suggest that a diversified portfolio of dividend-paying stocks is the best way to achieving long-term investing success. Others, such as Warren Buffett, have gotten mighty rich by focusing on a few good bets in businesses and sectors they understand.

Who’s right? They both are.

Countless studies have been conducted attempting to determine the ideal number of stocks for the average investment portfolio. Some have concluded as few as 12 stocks can get the job done while others believe 30 or more are needed to reduce the company risk present in a more concentrated portfolio.

The truth is, we’ll never know the answer to this question. We do know that active managers tend to underperform their benchmarks and, these so-called professionals, on average, hold 90 stocks in their mutual fund portfolios.

Bigger isn’t always better.

In fact, I’ll bet you that these three stocks (plus a fourth wildcard thrown in for good measure) from three different sectors will outperform most portfolios over the next three to five years.

Consumer cyclical

There are stronger selections in this sector, but if you bear with me I think you’ll understand why I’m recommending Dorel Industries Inc. (TSX:DII.B) as opposed to Canadian Tire Corporation Limited or one of the other larger stocks trading on the TSX.

I like Dorel because it operates in three different market segments: Sports, Home Furnishings, and Juvenile; all of which are in demand by consumers at different times in their lives. Growing its dividend by 10% annually over the past five years and currently yielding 4.1%, you’ll do well with this Quebec stock in the long term.

Basic materials

Since Montreal-based Intertape Polymer Group (TSX:ITP) received a letter last November from activist investors calling for change at the packaging goods company, its stock’s been on a bit of tear; it’s up 27% as of July 20.

At the time, U.S.-based hedge funds FrontFour Capital LLC and Zelman Capital LLC estimated Intertape’s shares were worth $23 per share. Clearly, investors felt the same as shares now trade north of $21.

Yielding 3.2% at the moment, Intertape is up 16% year-to-date and has generated a five-year annualized total return of 58%. Think of it as a cheaper version of CCL Industries Inc.


Although I don’t own any shares in Alaris Royalty Corp. (TSX:AD), I definitely admire its business model, which provides greater flexibility for its investee companies by structuring the monthly distributions based on the previous year’s revenue. When they have a hiccup, Alaris shares in the pain.

Not only is it one of my favourite mid-cap stocks on the TSX, it’s also what I consider to be the best publicly traded private equity firm in the country, and that’s saying something given that Onex Corporation is one of the other options.

Currently yielding 5.5%, its stock is up 28% year-to-date, and although it hasn’t done much of late, I expect big things over the long haul.


As most Canadian investors are aware, the TSX has a lot of energy and financial stocks listed on its exchange. Even the S&P/TSX 60, an index comprised primarily of Canada’s largest public companies, has almost 60% invested in those two sectors.

So, I’m suggesting that you buy a fourth security—the iShares S&P/TSX 60 Index Fund (TSX:XIU)—to fill in your portfolio. It yields just under 3%.

If you invest $10,000 in each of these securities over the next five to 10 years, I’m confident you’ll have significantly more than you do now.

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 Will Ashworth has no position in any stocks mentioned.

More on Investing

Stock analysts were once excited about construction company Aecon as an investment.

Bull or Bear: Why Analysts Changed Their Tune on Aecon Stock

Analysts had been champing at the bit for the construction company, but the tides have turned.

Read more »

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Should You Buy Bank Stocks Now?

Canadian bank stocks are getting cheap. Is this the right time to buy?

Read more »

stock data
Stocks for Beginners

2 Reliable Stocks Beginners Can Buy Amid the Market Selloff

As the broader market turmoil continues, new investors can buy these two reliable dividend stocks to get good returns on…

Read more »

Biotech stocks can be good yet risky investments.

Is Bellus Health Stock Still a Buy After 30% Earnings Jump?

The biotech continues to make progress on obtaining FDA approval for its chronic-cough therapy.

Read more »

Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Piggy bank next to a financial report

Do You Have Cash Sitting in Your TFSA? Now Is a Great Time to Buy Stocks

If you have cash in your TFSA that you're looking to invest, now is a great time to buy high-quality…

Read more »