Canadian investors are searching for top-quality dividend stocks to add to their TFSA or RRSP portfolios.
The strategy makes sense, especially when you have a long-term investing horizon and intend to use the dividends to purchase new shares. Let’s take a look at three companies that might be interesting picks right now.
TC Energy (TSX: TRP)(NYSE: TRP)
TC Energy owns oil and natural gas pipelines, gas storage, and power generation assets in Canada, the United States, and Mexico.
The energy infrastructure segment fell out of favour in the past couple of years due to pipeline opposition and rising interest rates. Getting big oil pipelines built remains a challenge, but the interest rate increases appear to be on hold, and that is bringing investors back to the sector.
On the growth front, TC Energy is in pretty good shape. The company has $30 billion in development projects on the go with $7 billion targeted for completion in 2019. As new assets go into service, the company expects to see cash flow increase enough to support dividend hikes of at least 8% per year through 2021.
The current payout provides a yield of 4.8%.
Bank of Nova Scotia (TSX: BNS)(NYSE: BNS)
Investors often skip Bank of Nova Scotia when searching for a financial stock to add to their portfolios, but the stock probably deserves more respect.
Bank of Nova Scotia is betting big on middle-class growth in Latin America. The company has invested billions of dollars to acquire assets in the Pacific Alliance countries of Mexico, Peru, Chile, and Colombia. The four markets are home to more than 225 million people.
Bank penetration is low compared to more developed countries, and this provides Bank of Nova Scotia with a significant opportunity over the coming decades as people seek out loans and investment products. Businesses also require a wide variety of cash management services when they move into new markets, and Bank of Nova Scotia’s presence in each of the four countries in the trade bloc gives it a competitive advantage.
The company has a strong track record of dividend growth, and that trend should continue. The stock appears somewhat oversold today, and investors who buy now can pick up a yield of 4.9%.
BCE (TSX: BCE)(NYSE: BCE)
BCE is a giant in the Canadian communications industry with extensive wireless and wireline network infrastructure providing Canadians with mobile, internet, and TV services. The company is widening its competitive moat through the expansion of its fibre-to-the-premises program. Its media holdings combined with the communications services have the ability to interact with most Canadians on a daily basis.
BCE is targeting free cash flow growth of 7-10% this year, which is important for supporting dividend growth. The company raised the payout by 5% for 2019. At the time of writing, the stock provides a yield of 5.3%.
The bottom line
TC Energy, Bank of Nova Scotia, and BCE are all strong players in their respective industries and should be solid picks for a buy-and-hold dividend portfolio. If you only pick one, I would go with Bank of Nova Scotia today.
