We’re halfway through the year – and what a year it’s been so far. A recovery seems baked into the markets, though, which could spell a rocky second act for 2020. Income investors should therefore be building positions in only the most stable businesses.
It seems as good a time as any to recap Canada’s top dividend growth stocks. Let’s review some the best names on the TSX Canadian Dividend Aristocrats Index.
The best of the best dividend stocks
It’s been a tough few months by anyone’s standards. Gold and consumer staples remain strong plays, indicating risk. Historical troughs and heroic peaks have seen fortunes won and lost (mostly lost). The wreckage of the March market crash is still being reckoned with, despite rallies and bullish analysts. That’s why so few names on the TSX Canadian Dividend Aristocrats Index are still in the green year on year.
Franco-Nevada (TSX:FNV)(NYSE:FNV) has seen its share price rocket 39% since last year. Not only is this gold mining stock the only meaningfully positive name in the Aristocrats Index, but it’s one of the strongest plays on the TSX all round.
A 0.77% dividend is scraping the bottom of the barrel in terms of yield. However, payments have grown reliably, making this a canny pick for years-long income investing.
By comparison, the only other stocks that remain positive among Franco-Nevada’s peers are miles below in terms of appreciation. Alimentation Couche-Tard is just about positive on average for the last 12 months, for example. CN Rail likewise is treading water, while BCE managed to lose just 5% since last June.
The worst Dividend Aristocrat stock performers this year
The Big Five has been hammered this year. Scotiabank is down by around 23%, while the worst performer in this category is currently BMO, down 25%. CIBC is down 13%, while TD Bank lost 15% in the last 12 months. RBC, Canada’s biggest bank, lost 10%. So much for the hegemony of the Big Five.
However, the year isn’t out yet, and with the economy on thin ice it could still go either way for the Big Five. A glance would tell new investors, though, that TD Bank and RBC are clear front-runners in terms of lower-risk plays in the blue-chip financials space.
Insurance stocks have been among the worst affected of Canada’s Dividend Aristocrats. The fact that the pandemic has essentially rearranged the insurance industry has not escaped investors. Manulife is down 29%, while Power Corporation of Canada has lost around 29% year-on-year. Great-West Lifeco has lost 27% and Sun Life Financial shed 16% since last June.
Hydrocarbon-weighted energy stocks have fared poorly, with Canadian Natural Resources down by a massive 43%. Midstreamers have been unpopular, too, with Pembina Pipeline ditching 27% and even the mighty Enbridge sliding 18%.
The take-home message here is that the trends of 2019 have continued into 2020. Hydrocarbon stocks were already looking weak, while banks were never going to be crowd-pleasers during a recession. Meanwhile, gold and consumer staples continue to outperform as risk characterizes a frothy market ripe for a painful correction.