2 Big-Dividend Stocks I’d Buy Hand Over Fist if I Had the Cash

If you want to boost your passive-income generation using long-term capital, you can consider these big dividend stocks today.

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Wouldn’t it be nice to earn big dividends on your investments for side income? Well, thanks to higher interest rates, stocks have sold off recently, making big-dividend stocks more attractive for income. Here are some dividend stocks I would personally buy hand over fist if I had the cash.

Bank of Nova Scotia stock

Scotiabank (TSX:BNS) stock has long been the dog among the Big Six Canadian banks. Sure enough, at about $69 per share at writing, it offers the biggest dividend yield of close to 6%. Investors can enjoy favourably taxed income from BNS stock’s eligible Canadian dividends. In other words, this income is taxed at a lower rate than your job’s income if you hold shares in your non-registered or taxable account.

Investors can depend on BNS stock for income. The bank, with a long history, has paid dividends non-stop for 190 years! In the last 15 years, it averaged dividend increases of about 5.8% per year, which is higher growth than the long-term inflation rate of about 2-3%.

Its trailing 12-month (TTM) payout ratio was 60% of net income available to common stockholders. This is on the high end. However, the international bank has the capability to protect its dividend. For example, its retained earnings are over $54.1 billion, which is 10.4 times its TTM dividend payout.

This top bank stock for current income is undervalued at 8.2 times earnings. So, investors with a long-term investment horizon are likely to experience meaningful capital gains on valuation expansion while earning juicy income.

Another big-dividend stock with the potential to increase its dividend long term is TELUS (TSX:T).

TELUS stock

TELUS is a low-volatility dividend stock that yields 5.1% at writing. The big Canadian telecom stock has increased its common stock dividend for about 19 consecutive years. Its five- and 10-year dividend-growth rates are 6.6% and 8.3%, respectively.

Its TTM payout ratio was 74% of net income. Additionally, it has retained earnings of $4.1 billion that can also act as a buffer. The telecom’s capital investments were intensive in the past few years. From 2019 to 2022, it used 89% of operating cash flow for capital spending. It seems to be tuning down capital spending, which would raise its free cash flow generation and provide greater protection for its dividend.

Management intends to increase TELUS’s dividend by 7-10% per year through 2025. Valuation-wise, at $27.30 per share, Bay Street believes TELUS trades at a discount of about 13%. This means that the defensive stock is likely to deliver some price gains on top of the growing dividend income.

The Foolish investor takeaway

Stocks are never for short-term investing, even for those that pay safe dividends. If you’re planning to buy shares in Bank of Nova Scotia or TELUS, make sure you have an investment horizon of at least three to five years to allow for your investments to grow. Barring market-wide corrections, they’re likely to trade higher in a long investment time frame.

Here are some more of the best Canadian stock ideas that I’d buy hand over fist when given the opportunity.

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 Kay Ng has positions in Bank of Nova Scotia and TELUS. The Motley Fool recommends Bank Of Nova Scotia and TELUS. The Motley Fool has a disclosure policy.

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