Canadian dividend stocks give investors a great way to generate passive income and boost their portfolio returns in the long run. However, the recent economic uncertainties have taken a toll on many fundamentally strong dividend stocks in the last year. While temporary economic uncertainties and market volatility might affect the short-term stock performance of even such dividend-paying companies, the long-term benefits of holding these quality stocks usually outweigh the short-term risks.
In this article, I’ll talk about two top Canadian dividend stocks that offer attractive yields and growth potential for investors who want to double up on their income streams.
Canadian Tire stock
Canadian Tire (TSX: CTC.A) has been trading on a bearish note for the last two years as investors remain worried about a recent decline in its earnings. With this, the stock currently trades at $139.56 per share with a market cap of $8.1 billion after witnessing a 20% decline in the last year. This drop, however, has made its dividend yield look even more attractive, which stands at around 5% on an annualized basis.
In 2023, Canadian Tire’s revenue slipped 6.5% YoY (year over year) to $16.7 billion due mainly to softening consumer demand, especially in the second half of the year. The company’s adjusted annual earnings dived by 44.7% from a year ago to $10.37 per share as weaker sales and high inflationary pressures continue to affect its bottom line.
Nonetheless, Canadian Tire invested over $680 million in capital expenditures last year, focusing on its Better Connected strategy, which could have a positive impact on its financial growth in the coming years. The company gave back nearly $740 million of capital to shareholders in 2023, even though demand was weak, showing its dedication to raising shareholder returns.
Despite facing some difficulties in the near term, I find Canadian Tire’s long-term growth prospects strong because of its steady efforts to invest in omnichannel strategies. Such investments can help this reliable dividend stock bounce back in the future when macroeconomic concerns ease gradually.
Stelco stock
Stelco Holdings (TSX: STLC) is another well-established Canadian business that income investors can consider doubling up on right now. After rallying by 427% in the previous four years, STLC stock has seen around 20% downside correction in 2024 so far. As a result, it trades at $40.20 per share with a market cap of $2.2 billion. At this market price, the stock offers a 4.2% annualized dividend yield.
While Stelco is expected to announce its full-year 2023 results after the market closing bell on February 21, its revenue in the first three quarters of the year slipped 17.4% YoY to $2.3 billion. Weaker average selling prices, lower shipping volume, and higher costs affected its financial growth trends in recent quarters.
On the positive side, steel prices and demand are likely to witness improvements in 2024 and beyond as economic growth comes back on track, which should ultimately boost Stelco’s profits again. Given that, the recent decline in its share prices could be an opportunity for long-term investors to buy this attractive dividend stock at a bargain.
