Investors looking to increase their passive income in 2023 will welcome the recent dividend increases on some of the best Canadian dividend stocks this earnings season. Dividend investors have a better shot at higher total returns on the three TSX stocks that raised their regular dividend payouts by more than 10% this month. However, the company with the highest dividend raise may not be the best dividend stock to buy right now.
Let’s have a look.
Nutrien raises common stock dividend by 10.4%
Fertilizer manufacturer, crop inputs retailer, and services provider Nutrien (TSX:NTR) raised its quarterly dividend by 10.4% this month to US$0.53 per share — payable on April 13, 2023. The $52 billion company’s raised payout increases the annualized dividend yield on Nutrien stock from 1.8% to 2.7% at today’s exchange rates. The NTR stock dividend is one of the safest on the TSX, given that it may comprise just about 16.4% of the company’s projected earnings for this year.
Nutrien stock graced the S&P/TSX Canadian Dividend Aristocrats Index this month after five consecutive years of dividend increases. Nutrien has raised its dividend at an annualized rate of 7.5% per annum over the past half-decade. Wall Street analysts project a 5% dividend increase on Nutrien stock for 2024.
Dividends increased total returns on NTR stock from a capital gain of 74% to a total return of 105.8% over the past five years.
If you wish to receive the raised Nutrien stock dividend, you should buy NTR stock before March 30, 2023.
Peyto Exploration & Development pays a 120% higher dividend
Natural gas producer Peyto Exploration & Development (TSX:PEY) paid its new $0.11 per share monthly dividend on February 15, 2023. The $2.1 billion company’s February dividend was 120% higher than the company’s previous $0.05-per-share dividend paid to PEY stock investors in January. The raised payout helps to double the dividend yield on Peyto stock from 5.3% over the past year to 11% over the next 12 months.
Peyto officially raised its monthly dividend back in November last year, starting with the February 2023 payout. The raised dividend should comprise about half of Peyto stock’s expected earnings per share for 2023. Peyto’s dividend yield is juicy and inviting; however, it doesn’t appear that safe.
The natural gas company is heavily indebted with about $935 million in debt and a paltry $21 million in cash on its balance sheet. Natural gas prices have declined by 43% so far in 2023 after a warm winter experienced in Europe and North America.
A heavy debt load in the face of rising interest rates, and falling gas prices combine to severely threaten Peyto stock’s future dividends, even though about 60% of 2023 production is hedged at fixed prices. The company cut its dividends three times over the past six years.
That said, Peyto’s dividend meant all the difference between a loss and a gain on investment during the past five years. Dividends turned a 1.5% capital loss into a 24.6% capital return on PEY stock positions over the past half-decade.
Manulife Financial increases dividend by 11%
Life insurance, asset manager, and annuities provider Manulife Financial (TSX:MFC) raised its regular dividend by 11% in February. The dividend yield on Manulife stock grows to 5.5%, up from 4.9% over the last 12 months. The $49.7 billion financial company’s dividend remains well covered given a low payout rate of 36% of growing income.
Manulife remains a value stock to buy after reporting a record net income of $7.3 billion for 2022. The company is reaping the gains of an expanding business footprint in Asia, tapping into a growing middle-class and high-net-worth population in China, an aging global population, and benefits from the digitization trend.
If you had invested $10,000 in Manulife stock 10 years ago, you would have more than $26,500 in your account today, with full dividend reinvestment. Capital growth would have taken you to $18,000. Manulife stock’s growing dividend contributed to total returns more than share price growth did.
Manulife has raised its common stock dividend every year for nine consecutive years. Shares trade cheaply at a forward price-to-earnings multiple of 7.4, and the company is actively buying back its common stock through repurchase programs.
