Canada’s stock market differs significantly from the U.S. While the U.S. stock market is weighted towards technology and communication sector stocks, ours tends to favour financial and energy sector stocks. Many of these stocks are those of large-cap, mature, blue-chip companies.
Another unique trait of large-cap Canadian stocks is a tendency to pay high dividends, often with a track record of growing them year over year. While U.S. dividends are subject to a 15% foreign withholding tax outside of an RRSP, Canadian dividends are much more tax-efficient.
Canadians hunting for high-yielding stocks might like my five picks today, which all have a forward dividend yield of over 4%. The forward dividend yield is projected based on the assumption that the latest quarterly dividend paid by the stock and its current share price remain consistent moving forward.
Bank Stock #1
My first pick is the Bank of Nova Scotia (TSX:BNS), one of Canada’s “Big Six” banks. Thanks to its outstanding performance over the last decade, BNS sits among the 10 largest holdings in the benchmark S&P/TSX 60 index due to its market-cap weighted methodology. As of February 21st, BNS’s projected forward annual dividend yield is 5.65%
Bank Stock #2
An alternative and close competitor to BNS is the Bank of Montreal (TSX:BMO). I like this bank stock in particular due to its robust profitability. Currently, BMO has a profit margin of 40.6% along with a return on equity of 21%. The stock went ex-dividend in January and will payout on February 28th, with an estimated forward dividend yield of 4.23%.
Energy Stock #1
One of the best performing TSX sectors in 2022 was energy. This robust sector survived high inflation thanks to the tailwinds from rising commodity prices. When it comes to energy stocks, the current king is Enbridge Inc. (TSX:ENB), which also sits in the top ranks of the S&P/TSX 60. Enbridge pays one of the largest dividends in the Canadian market, with a forward yield of 6.78%.
Energy Stock #2
Diversification is always a good idea. Enbridge may be a solid stock, but picking one of its smaller peers could be a way to mitigate the chance of it faltering. A good option here is Canadian Natural Resources Limited (TSX:CNQ). CNQ recently grew its quarterly earnings year over year by 27.8%. Right now, CNQ’s projected forward dividend yield is 4.53%.
Canada’s telecom industry operates in an oligopoly, with a handful of providers dominating the scant level of competition. A notable giant in this industry is BCE Inc. (TSX:BCE). I particularly like this stock due to its low beta of 0.48, which indicates that BCE is less volatile than and sensitive to market movements. BCE’s current forward dividend yield rivals that of ENB at 6.26%.