Are you looking for smart dividend stocks to buy with $5,000 right now?
If so, you have plenty of good options to choose from on the Toronto Stock Exchange.
Canada’s markets are heavily weighted in dividend-paying sectors like energy, banking, and utilities. Historically, this has held back Canadian stock returns somewhat compared to those of U.S. markets. But today, with large U.S. tech companies trading at 35 times earnings and spending copious amounts of money on pricey AI graphics cards, the moment may be right for Canadian equities to shine. With that in mind, here are three Canadian dividend stocks that could prove good holdings in a $5,000 portfolio.
Fortis
Fortis Inc (TSX:FTS) is a Canadian utility company with an extremely impressive dividend track record. It has raised its dividend for 51 consecutive years, making it a Dividend King. It aims to keep the dividend hikes coming through to 2028.
How has Fortis managed to achieve its impressive dividend track record?
Mainly through a combination of advantages that all regulated utilities enjoy, as well as Fortis’ unique advantages. Regulated utilities in general enjoy highly stable revenue because they are often de-facto monopolies that supply essential services. Fortis and its competitors alike enjoy this advantage.
However, Fortis has performed much better than the average TSX utility over the years. That’s thanks to its emphasis on prudent expansion and keeping its dividend payout ratio below 100%, both of these being virtues that most of FTS’ competitors haven’t been able to match.
CN Railway
The Canadian National Railway (TSX:CNR) is a Canadian railroad company with at least 27 years of dividend increases under its belt. I say “at least” because that’s the maximum number of years which the data provider I’m using keeps track of. CN’s dividend track record could well be longer than 27 years.
What has empowered CNR to deliver all these rising dividends over the years?
First, it has a great competitive position, with only one major competitor. Second, it’s an economically indispensable company that transports $250 billion worth of goods across North America each and every year. Third and finally, the company is highly profitable with a 32% net income margin and a 15% free cash flow margin.
Rail transportation will always be cheaper than trucking for hauling bulk goods over long distances. As long as this remains true, then CN Railway’s strong competitive position will deliver investors plenty to be happy about.
TD Bank
If your appetite for risk is a little higher, you could consider an investment in the Toronto-Dominion Bank (TSX:TD). This bank stock took a severe beating last week when its years-long U.S. money laundering investigation wrapped up with a US$3 billion fine and a US$434 billion U.S. asset cap. The bank has to sell off some of its U.S. assets now to cope with the asset cap.
TD took a hit from all this, without a doubt. However, the fine came in lower than many feared, and the asset cap does not prevent TD from continuing to grow its U.S. investment bank, brokerage services, or Canadian businesses. The hit was far tamer than it could have been. Also, TD should be able to earn just as much money in the years ahead as any of its competitors. Its depressed valuation, then, may be a buying opportunity. It’s important to note though that this stock faces more legal risk than its peers, and it is not for the faint of heart.
