The Canadian stock market surged to a fresh all-time high last week after the Bank of Canada’s decision to slash interest rates for a second consecutive time boosted investors’ confidence. As lower interest rates are likely to stimulate economic growth and consumer spending, many dividend-paying stocks could see their share prices soar in the near future. Given this, it could be the right time for long-term investors to consider investing in dividend stocks that stand to benefit directly from such an economic environment.
In this article, I’ll highlight two top TSX dividend stocks that could benefit from the lower interest rate environment and provide steady income to investors.
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First Capital REIT stock
As lower interest rates are likely to stimulate the real estate sector by making financing more affordable, First Capital REIT (TSX: FCR.UN) is one of the top stocks from this sector to consider right now. This Toronto-headquartered REIT (real estate investment trust) focuses mainly on a high-quality portfolio of retail and mixed-use properties in strategic urban locations. It primarily invests in properties located in densely populated neighbourhoods in Canada’s largest cities, which help in creating thriving communities around its developments.
After rallying by around 14.1% over the last two months, First Capital REIT currently has a market cap of $3.5 billion as its stock trades at $16.39 per share. At this market price, it offers an attractive 5.3% annualized dividend yield and pays its dividend monthly.
In the second quarter of 2024, First Capital’s operating funds from operations rose 8.4% YoY (year over year) per unit to $0.32 per share with the help of strong leasing performance and effective cost-management strategies. Similarly, its same-property net operating income also improved by 4.6% YoY last quarter, which is a reflection of its rising profitability from the existing portfolio.
During the quarter, the trust also invested roughly $37 million in property development and redevelopment projects, which could accelerate its financial growth trends in the long run. Moreover, its grocery-anchored retail properties in prime Canadian neighbourhoods help it maintain a stable income base, making it an attractive investment option for the long term.
Canadian Tire stock
In addition to real estate, the retail sector could also be an attractive area for dividend investors right now, especially as well-established retailers could benefit from stronger consumer spending triggered by lower interest rates. Canadian Tire (TSX: CTC.A) stands out as an excellent example of this. As a major player in the Canadian retail market, Canadian Tire benefits from a diverse range of product offerings that cover the automotive, home improvement, sports, and apparel sectors.
Canadian Tire currently has a market cap of $8.1 billion as its stock trades at $140.45 per share after rising by nearly 6% over the last three months. The stock offers a decent 5% annualized dividend yield and distributes its dividend payouts on a quarterly basis.
While the company is slated to announce its second-quarter results later this week, it posted a solid 38% YoY jump in its first-quarter adjusted earnings to $1.38 per share despite macroeconomic pressures. Moreover, Canadian Tire’s continued focus on operational efficiency, strategic partnerships, and investments in digital innovation brightens its long-term growth outlook, making it an attractive dividend stock to buy now and hold for years to come.
