If you are looking for top-yielding TSX dividend stocks, here are some of the hot picks.
Canadian Utilities
When it comes to relatively safer investments, utility stocks are better choices. Among TSX utilities, Canadian Utilities (TSX:CU) is a high-yielding name that has raised dividends for the last five consecutive decades.
It derives a large chunk of its revenues from regulated operations, which makes its financials quite stable. Even during economic downturns, companies like Canadian Utilities do not see a significant change in demand for their services. This makes their earnings relatively stable and predictable. That’s why it has managed to raise shareholder payouts through the pandemic and even through the 2008 financial meltdown. CU stock currently yields 5%, higher than the industry average.
CU stock has lost 2% in the last 12 months but has returned 9% compounded annually in the last 10 years. So, note that if you have a short-term horizon, utility stocks might disappoint you. However, they generally create a decent amount of wealth in the longer term, mainly driven by their consistently increasing dividends.
Canadian Natural Resources
Canada’s biggest oil producer Canadian Natural Resources (TSX:CNQ) pays a decent dividend yield of 4.5%. It has increased shareholder payouts for the last 23 consecutive years, a rare feat in the energy industry.
Canadian Natural Resources has stable earnings and a strong balance sheet that funds such consistently growing payouts. Thanks to its high-class assets and relatively higher oil prices, CNQ has seen stellar free cash flow growth since the pandemic. While much of this excess cash went towards deleveraging, the rest was used for shareholder returns.
CNQ stock has returned 10% in the last 12 months and over 500% in the last three years. For 2023, investors can expect strong buyback activity from it, along with stable dividends. Higher oil prices will likely push energy stocks higher. Moreover, steeper free cash flow growth will allow higher allocation to shareholder returns, further increasing shareholder value.
TC Energy
Canadian energy pipeline operator TC Energy (TSX:TRP) is another interesting bet for income-seeking investors. It yields 6.6%, way higher than the TSX stocks’ average. Like peers, it has a long dividend payment history and has raised dividends for the last 23 consecutive years.
Apart from oil and gas infrastructure, TC Energy has interests in power generation facilities as well. This diversified asset mix ensures revenue stability and predictability.
As a result, its earnings have grown by over 7%, compounded annually in the last 10 years. Moreover, even if oil and gas prices turn volatile, TC Energy continues to grow stably, driven by its long-term, fixed-fee contracts. It intends to grow its dividends by 3%–5% per year in the foreseeable future.
TC Energy stock has lost 22% in the last 12 months, notably underperforming TSX energy stocks. However, it will likely create returns in higher-single digits in the long term, driven by its stable earnings and dividends.
