Cash in Your Pockets: 3 Dividend Stocks Canadians Love

These Canadian dividend stocks, including Canadian Natural Resources, insulated income investors from a recent inflation bout. They can do much more.

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The average Canadian could need an income raise for 2023 following a record inflation bout that eroded the purchasing power of their income streams during the past two years. Dividend stock investors welcomed the timely “inflation-beating” dividend raises on three dividend aristocrats the market has fallen in love with over the past decade. They paid more cash into investors’ pockets, reducing the need to sell stocks at a discount to cover living expenses.

Let’s have a look at how each of the dividend stocks came to investors’ rescue, and why you need them in a passive income portfolio.

TD Bank

The Toronto-Dominion Bank (TSX:TD), or TD Bank, is a favourite Canadian dividend stock for most investor age groups. It has been a dependable dividend payer since 1857. TD Bank stock has been on a 12-year dividend growth spree. Most noteworthy, the bank stock has raised dividends at rates well above annual inflation – preserving investors’ purchasing power during a tumultuous 2022.

TD Bank raised its quarterly dividend by 12.7% for 2022, and by another 7.9% for 2023, cushioning investors against 4.8% inflation in 2021, and a 6.3% inflation rate in 2022. You can buy more with the cash dividends from TD this year than you could a year ago.

The current quarterly dividend on TD stock yields a respectable 4.7% annually. The bank paid out just 49% of its earnings as dividends over the past 12 months. Its dividends are well covered by earnings, and free cash flow.

What’s more, TD Bank has ample capital after abandoning a planned acquisition of First Horizon this year. The bank may choose to reinvest the capital in a new target, underwrite more businesses, or return the excess capital to shareholders through share repurchases and dividend raises.

TD has an approved share buyback plan to repurchase up to 30 million shares over the next 12 months. Although the bank needs a strong North American economy to earn more money for its investors, TD stock’s dividend has survived all recent economic recessions.

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Canadian Natural Resources

Commodity prices may be inherently volatile, but Canadian Natural Resources (TSX:CNQ) is an oil production giant that has paid its stock investors a steadily growing cash dividend every year for 23 consecutive years now – a stellar dividend track record income-oriented investors love. And there’s more to like about the Canadian dividend stock.

Thanks to its low-decline assets and industry-leading low breakeven points, Canadian Natural Resources is generating record cash flows as benchmark crude oil prices oscillate around the US$70 per barrel mark on the West Texas Intermediate (WTI). The company generated $3.4 billion in adjusted funds flow during the first quarter. It returned $2.8 billion to shareholders through share repurchases and dividends during the first four months of 2023.

CNQ recently raised its dividends by 5.8% in March, and committed to returning 100% of free cash flow to shareholders when net debt reaches $10 billion. The policy should mean higher dividend raises ahead, as long as oil prices comply. Net debt dropped to $11.9 billion by March 31, 2023.

Most noteworthy, the company historically raised dividends during three recent economic recessions, another reason why Canadian investors love CNQ stock. It’s an oil giant that takes good care of income-oriented investors who value cash dividends.

Manulife Financial

Financial sector stocks are generally a good place to find value stocks that pay lovely cash dividends. Manulife Financial (TSX:MFC) is an insurance and wealth management behemoth that pays dependable and growing cash dividends to stock investors. The company has paid cash dividends to investors for 23 three years and raised its annual payouts for nine consecutive years now.

Manulife recently raised its cash dividend by 10.6% for 2023, following a 17.9% dividend raise for 2022 – far above record inflation rates experienced during the past year. The current MFC stock dividend yields a juicy 5.9% annually.

The business remains profitable. Manulife reported core earnings of $1.5 billion for the first quarter of 2023, up 6% on a constant currency basis from a comparable period last year. Earnings remain strong despite market volatility. Manulife’s diversified business footprint taps into a resilient North American insurance market and saw encouraging sales growth momentum in Asia.

Financial analysts forecast a respectable 7.4% annual growth rate in Manulife’s earnings per share over the next five years. Growing earnings should sustain respectable dividend growth rates during the period.

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 Brian Paradza has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

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