Last June, I created a list of 20 top TSX dividend stocks that investors should consider adding to their portfolio. In it, I required that companies have a secure dividend. As a group, the 20 stocks beat the broader market by a large margin. In this article, I will choose three of those companies that still present compelling buys today. Here are three top TSX dividend stocks for your portfolio.
This business makes money, so could you
Because of the pandemic, banks were less willing to lend money. As a result, Canadians needed to find alternative lenders. Cue, goeasy (TSX:GSY). The company provides high-interest loans to subprime lenders and sells furniture and other home goods on a rent-to-own basis. Goeasy saw a massive spike in revenue and sustained growth in its overall loan portfolio in 2020. Through the current year, the company’s stock has been one of the top performing stocks on the TSX.
However, the most impressive aspect about this company is its dividend. With a dividend growth streak of 6 years, goeasy is listed as a Canadian Dividend Aristocrat. Since 2014, the company has managed to increase its dividend distribution by more than 700%! Currently, the stock offers a smaller forward yield of 1.86%. However, its payout ratio is also very low (13.87%). This suggests that goeasy could very easily increase its dividend in the coming years, while providing a large margin of safety should anything happen.
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Choose one of Canada’s top banks
The Big Five Canadian banks are all great dividend companies. All five are listed as Dividend Aristocrats, which makes it difficult to separate a single company out of the group. However, my top choice would be Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). The company offers a very nice forward yield of 4.53%, while maintaining a payout ratio of 67.67%. While this is a bit higher than an ideal payout ratio, Bank of Nova Scotia’s 10-year streak of dividend raises should be reassuring to investors.
The aspect of Bank of Nova Scotia’s business that sets it apart from its peers is its positioning within the Pacific Alliance. This is a region which contains the countries of Chile, Columbia, Mexico, and Peru. Economists project this area of the world to grow more rapidly than the G7 over the coming years. Bank of Nova Scotia’s exposure to this area of Latin America could allow the company to emerge as the bona fide leader among the Canadian banks.
Looking for a reliable dividend? Choose a reliable sector
The utility sector features some of the most consistent companies. While these businesses may not be the most interesting to follow, there’s no doubt that they play an important role in our society. Regardless of the economic conditions, homes and businesses alike will require utilities. Because of this, companies like Fortis (TSX:FTS)(NYSE:FTS) would be excellent to consider in your portfolio. With more than 3.4 million customers in Canada, the United States, and the Caribbean, Fortis is an international leader in the regulated gas and electricity utility industries.
Fortis claims the second longest active dividend growth streak in Canada, at 47 years. The company is aiming to continue growing its dividend by an average annual rate of 6% through to 2025. The fact that Fortis has managed to sustain its dividend growth despite the numerous market downturns over the past five decades should be very appealing to investors. This is a well-managed company with a strong history of performance.
Interested in more top stocks to add to your portfolio?
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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 Jed Lloren has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA and FORTIS INC.