When it comes to stocks, most investors want price increases above all else.
But when investing for the long term, it helps to consider dividends as well. Dividend stocks have the potential to reward investors handsomely over the long pull, making them strong “buy-and-hold” plays. I’m going to share my picks for the best three dividend stocks on the TSX.
Inter Pipeline Ltd. (TSX:IPL)
Inter Pipeline is a Canadian multinational involved in petroleum extraction and transportation. It is one of the biggest natural gas extraction businesses in the world.
There are many good reasons to invest in Inter Pipeline—and not just because of the giant dividend yield.
First, the company is a great value play. With a P/E ratio of 17.59 (at the time of this writing), it could be described as undervalued. The stock’s price is also fairly low compared to book value.
Second, the company is perfectly positioned in a growing industry. After the price collapse in 2014, crude oil is beginning to recover. The price of Brent crude approached $80 a barrel last week and is holding steady.
Third, Inter Pipeline is a strong long-term grower. The stock’s recent closing prices—in the $23-25 range—are up significantly from the $4.80 when it listed on the TSX in 2000.
Fortis is a Newfoundland and Labrador based utilities company. It owns assets in Canada, the United States, Central America, and the Caribbean. In the quarter ended March 2018, it turned a profit of $339 million on $2.2 billion in revenue. The company has a P/E ratio of 17.81.
These factors alone make the stock worth considering as a value play. But beyond that, there’s a solid dividend up for grabs, with a yield of 4.05% at the time of this writing. Fortis also has a long history of dividend increases.
TC Pipelines owns and manages natural gas pipelines.
TC Pipelines has a dividend yield of 4.85% at the time of this writing, making it one of the highest yielders on the TSX. The dividend also has a long history of steady increases from 16.81 cents in a quarter in 1999 to $1 in more recent quarters.
But dividends aren’t the only reason to invest in TC Pipelines.
The company has some strong value metrics, including a P/E of about 21. The company has experienced steady year-over-year profit growth, indicating solid fundamentals and an ability to deliver value to shareholders.
When investing in dividend stocks, it’s best to aim for the long term.
The longer you hold, the more dividends you collect. Price should be factored into the equation, as with any stock investment. But a company with a high yield represents a true long-term play—one you may never need to sell. If you’re looking to make some dividend investments this year, any one of the companies mentioned in this article would be worth considering.
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 Andrew Button has no position in any of the companies mentioned.