Are you retired and looking to add some passive income to your portfolio in 2024?
If so, it pays to look into dividend stocks. With the Bank of Canada cutting interest rates, GIC yields are likely to go down. However, there is still plenty of yield available in the world of equities. With tech stocks soaring to record highs, dividend stocks have become somewhat overlooked. As a result, they now have some of their highest yields in years.
The above observation is especially true of Canadian markets. The TSX Composite Index is heavily weighted in high dividend sectors like banks, energy, and utilities. As a result, it is possible to find truly incredible yields among Canadian equities. In this article, I will explore three Canadian dividend stocks and one exchange traded fund (ETF) that may be worth buying in 2024.
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The TSX Composite
The iShares S&P/TSX Composite Index (TSX:XIC) is a cornerstone holding in many Canadian retirees’ portfolios. It’s extremely diversified, with 224 holdings. It has a high yield by index fund standards (2.8%), and it is highly liquid and widely traded. As a result of these characteristics, XIC has the prospect of very good after-tax returns. When investing, it pays to diversify. So, funds like XIC are very much worth holding at high portfolio weightings.
Canadian Utilities
Canadian Utilities (TSX:CU) is a Canadian utility stock with a 5.1% dividend yield. The company has raised its dividend every year for the last 52 years, making its stock a “Dividend King.”
How has Canadian Utilities achieved such a remarkable dividend track record?
It comes down to a few different things.
First, as a regulated utility, it has a strong competitive position supplying an essential service (heat and light). As a result, it enjoys highly stable revenue.
Second, the company is operationally diversified, with operations across Canada and the United States. So, weakness in one area of the business can be compensated for by strength in another.
Third and finally, the company is generally well run, with a seasoned management team that keeps its financial house in order. It all adds up to a very dependable stock.
Fortis
Fortis Inc (TSX:FTS) is another Canadian utility, this one with a 4% dividend yield. Fortis has many of the same positive characteristics that Canadian Utilities has: stable revenue, diversified operations, and competent management. However, Fortis is somewhat heavier on the ‘quality’ factor and weaker on the value factor than CU is. Fortis has less debt and a lower payout ratio than CU. As a result, it trades at a higher multiple than CU does, and has a lower yield. The positive side is that the company appears to be better run, and if it continues being well run, it will probably realize capital gains, which are less likely to materialize in CU’s case.
CN Railway
Last but certainly not least, we have The Canadian National Railway (TSX:CNR). CN Railway only has a 2.3% dividend yield, but it has very good dividend growth, having raised its payout by 10% per year over the last five years.
CNR stock has been going through a rough patch lately. The last few years have not been kind to railroads, as the crude-by-rail business has declined from the lucrative 2022 period. However, CN Railway returned to positive revenue growth last quarter, and should continue growing in the years ahead. All in all, I’d be comfortable owning CNR stock.
