The Toronto Stock Exchange and international stock markets are posting sharp losses lately due to the collapse of US banks and the debt problems of a global investment bank. The pullback in bank stocks is due to renewed fears over the financial stability of the sector. Meanwhile, a sell-off is happening in the energy sector due to falling oil prices.
Still, the Bank of Montreal (TSX:BMO) and Freehold Royalties Ltd. (TSX:FRU) remain solid investment choices. You can also buy Chartwell Retirement Residences (TSX:CSH.UN) hand over fist this month. The dividend payments of these high-quality stocks should be sustainable despite the negative market sentiment.
Bank depositors and investors have reservations about Canada’s banking sector. The knee-jerk reaction of many is understandable, but according to Trevor Tombe, an economics professor at the University of Calgary, it remains stable. Tombe adds the prospect of a bank failure is extremely low.
Laurence Booth, a finance professor at the University of Toronto, has the same observation. He said, “The big test for the Canadian banks was the financial crisis in the United States in 2008 and 2009. He adds the banking systems got even more secure, and there are even more requirements to hold liquid reserves and keep capital.
BMO, the third-largest Canadian bank, is a no-brainer buy. The $83.2 billion bank is the dividend pioneer and has been paying dividends since 1829, or 194 years. At $118.26 per share (-2.56% year to date), the dividend yield is a juicy 5.44% dividend.
Freehold is North America’s premier energy royalty company. The $2.1 billion firm isn’t an oil and gas producer but owns a sizeable land base in Canada and the US. It collects royalty streams from clients or drillers. Management focuses on providing investors with lower-risk returns and growth over the long term.
Its President and CEO, David M. Spyker, said 2022 was a year of records since Freehold’s asset base, development inventory, and revenue generation are underpinned by exceptionally high-quality payors. He adds the scale and asset base of Freehold will enable sustainable, long-term value creation for shareholders.
At $14.06 per share (-10.17% year to date), prospective investors can partake in the lucrative 7.36% dividend. Freehold has increased its dividend by 500% since the COVID-related lows.
Growing senior population
Chartwell pays a generous 7.05% dividend yield, and at $8.62 per share, investors enjoy a 3.21% year-to-date gain. The $2 billion operator of seniors housing communities had a strong finish in 2022, notwithstanding a challenging year.
In 2022, resident revenue and net income rose 5.3% and 389% to $661 million and $49.5 million, respectively, versus 2021. The weighted average occupancy rate in Q4 2022 rose to 78.4% from 77.6% in Q4 2021. Vlad Volodarski, Chartwell’s CEO, said, “We remain focused on occupancy and cash flow recovery.”
Management plans to implement proven and new creative strategies to accelerate growth in 2023. The rapidly growing senior population drives growth, while slower new constructions and shortages of long-term care beds further support business growth.
BMO, Freehold Royalties, and Chartwell are well-positioned to overcome the current headwinds. The dividend payments should be rock-steady and can compensate for the price drops.