Dividend stocks are companies that pay shareholders a portion of their profits. The payout is generally made on a quarterly basis, but a few TSX stocks also offer a monthly dividend payment. Moreover, the dividend yield depends on the amount you receive and the company’s share price.
So, if a company’s stock price is $100 and it pays shareholders $5 in annual dividends, its yield is 5%. It also suggests the yield will increase if the stock price falls and vice versa. In addition to a steady stream of dividend income, investors can also benefit from share price appreciation or capital gains over time.
Several dividend stocks are blue-chip companies that generate positive and stable cash flows across market cycles, making them less volatile compared to growth stocks and small or mid-cap stocks.
While investing in quality dividend stocks is a popular strategy on Bay Street, it’s quite difficult to identify long-term winning bets. For instance, companies need to report predictable cash flows with the ability to increase these payouts over time.
Further, the dividend payout should be sustainable, allowing management teams to pursue organic growth opportunities and acquisitions while strengthening the balance sheet.
Keeping these factors in mind, here are the best dividend stocks in Canada right now.
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Sun Life Financial stock
Valued at a market cap of almost $40 billion, Sun Life Financial (TSX: SLF) currently offers you a dividend yield of 4.6%. One of the largest insurance companies globally, SLF stock has already returned 406% to shareholders in the last 20 years after adjusting for dividends. In this period, the TSX giant has increased dividends by 7.5% annually.
Sun Life stock is currently priced at 10 times forward earnings, which is quite cheap. Analysts remain bullish and expect shares to gain more than 10% in the next 12 months.
Brookfield Renewable Partners
One of the most promising companies on the TSX is Brookfield Renewable Partners (TSX: BEP.UN). Since May 2003, BEP stock has returned a monstrous 2,110%. Despite its outsized gains, it currently offers shareholders a tasty dividend yield of 4.3%.
Brookfield Renewable continues to invest in capital expenditures, which has increased its cash flows at a rapid pace. In the last five years, the green energy owner and operator has allocated US$12 billion towards capital expenditures across clean energy verticals such as wind, solar, hydro, and battery storage.
Despite a sluggish macro environment, the company increased funds from operations by 8% year over year in 2022 on the back of its contracted and inflation-linked cash flows.
Down 31% from all-time highs, Brookfield Renewable stock is trading at a discount of 14% to consensus price targets.
Telus stock
Another TSX giant, Telus (TSX: T), is part of a recession-resistant sector. Despite its massive size, Telus increased operating revenue by 16% year over year to $5 billion in Q1 of 2023. The uptick in sales was driven by higher service revenues in segments such as Telus Technology Solutions (TTech) and Digitally-led Customer Experiences (DLCX).
TTech sales soared due to the acquisition of LifeWorks last September and higher mobile network revenue. Comparatively, DLCX’s revenue was up due to customer growth and expanded services for existing clients.
Telus stock offers you a yield of more than 5%, and these payouts have risen by 12% annually in the last 20 years.
