3 Top Dividend Stocks Canadians Can Feel Confident Buying Aggressively

You may not usually think of these dividend stocks first, but each offers a strong reason to consider adding them to your portfolio.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 29, 2024 4:00 pm EST

Investing in dividend stocks on the TSX can be a rewarding strategy for those seeking regular income and potential capital appreciation. However, it’s essential to approach this endeavour with a discerning eye to ensure your investments align with your financial goals. When evaluating dividend stocks, consider factors such as dividend yield, payout ratio, earnings stability, and the company’s growth prospects.

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What to consider

A high dividend yield might seem attractive, but it’s crucial to assess whether it’s sustainable. The payout ratio, which indicates the proportion of earnings distributed as dividends, provides insight into this. A lower payout ratio suggests that the dividend stock retains ample earnings for growth and can maintain its dividend payments even during economic downturns.

Earnings stability is another vital consideration. Companies with consistent earnings are more likely to sustain regular dividend payments. Reviewing a company’s financial statements and historical performance can help gauge this stability. Plus, understanding the company’s future outlook, including its industry position and growth strategies, is essential for long-term investment success. So, let’s look at three that provide the perfect winning combination.

goeasy

First up, goeasy (TSX:GSY) is a leading provider of non-prime leasing and lending services. As of September 30, 2024, GSY reported a market capitalization of approximately $2.86 billion, with a trailing price-to-earnings (P/E) ratio of 10.40 and a forward P/E of 8.42.

The dividend stock achieved a profit margin of 35.31% and an operating margin of 48.80%, reflecting robust profitability. GSY’s return on equity stood at an impressive 25.75%, indicating effective management and strong financial performance. The dividend stock declared a forward annual dividend rate of $4.68, yielding about 2.74%, with a payout ratio of 27.26%, suggesting a sustainable dividend policy.

OpenText

OpenText (TSX:OTEX) specializes in enterprise information management solutions. As of September 30, 2024, OTEX had a market capitalization of approximately $11.41 billion, with a trailing P/E ratio of 17.64 and a forward P/E of 8.33.

The dividend stock maintained a profit margin of 8.35% and an operating margin of 19.92%. OTEX’s return on equity was 11.50%, reflecting solid management performance. The dividend stock offered a forward annual dividend rate of $1.46, yielding around 3.40%, with a payout ratio of 58.53%, indicating a commitment to returning value to shareholders.

NorthWest

Finally, NorthWest Healthcare Properties REIT (TSX:NWH.UN) focuses on healthcare real estate investments. As of September 30, 2024, NWH.UN had a market capitalization of approximately $1.22 billion. The dividend stock reported a negative profit margin of 75.29%, primarily due to fair value losses on investment properties.

However, it maintained an operating margin of 66.41%, showcasing operational efficiency. NWH.UN’s return on equity was down 14.67%, reflecting recent challenges. The real estate investment trust (REIT) declared a forward annual dividend rate of $0.36, yielding about 7.23%, with a payout ratio of 299.44%. It’s worth noting that the company announced a dividend cut of 55% to $0.03 monthly in November 2024, thus aiming to strengthen its balance sheet and enhance financial flexibility.

Bottom line

In summary, when selecting dividend stocks on the TSX, it’s essential to evaluate financial metrics and understand the dividend stock’s business model. Plus, consider the sustainability of dividend payments. GSY, OTEX, and NWH.UN each presents unique opportunities and risks. Conduct thorough due diligence and consider consulting financial advisors to ensure these investments align with your financial objectives.