Dividend stocks are ideal additions to your portfolio due to their consistent payouts and stability. These companies have also historically outperformed non-dividend-paying stocks. Additionally, investors can reinvest the dividend payouts to earn superior returns. Against this backdrop, let’s examine three Canadian dividend stocks with solid underlying businesses and attractive valuations, offering attractive buying opportunities for long-term investors.
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Telus
Telecommunication companies enjoy reliable cash flows due to their recurring revenue streams, thereby allowing them to reward their shareholders with healthy dividend yields. For this reason, I have chosen Telus (TSX:T) as my first pick. Supported by its healthy cash flows, the company has paid $22 billion in dividends since 2004, while repurchasing $5.2 billion of shares. Also, the Vancouver-based telecom player has raised its dividend 28 times since May 2011 and currently offers an attractive dividend yield of 7.4%.
Moreover, Telus is expanding its network infrastructure and has planned to invest $70 billion over the next five years. Currently, its 5G service covers 87% of the country’s population. Furthermore, the company’s other business segments, Telus Health and Telus Agriculture & Consumer Goods, are experiencing solid growth and margin expansion. Supported by its healthy growth prospects, Telus’s management anticipates raising its dividends by 3–8% annually through 2028. Despite these healthy growth prospects and high yield, T stock currently trades at a cheaper NTM (next 12 months) price-to-sales multiple of 1.6, making it an excellent buy for long-term investors.
Canadian Natural Resources
Second on my list is Canadian Natural Resources (TSX:CNQ), a Canadian oil and natural gas producer, which has raised its dividends over the last 25 years at an annualized rate of 21%. Its large, low-risk, and high-value reserves, combined with effective and efficient operations, have lowered its expenses, thereby driving its margins and cash flows. Supported by these healthy cash flows, CNQ has consistently raised its dividends and currently offers an attractive forward dividend yield of 5.6%.
Moreover, the Calgary-based energy company continues to expand its production capabilities and plans to invest approximately $6 billion this year. Additionally, the company has approximately 32 years of total reserve life index and can quickly ramp up its production with rising oil prices. The company has strengthened its balance sheet by lowering its debt levels by $1.4 billion in the first quarter. Meanwhile, the company’s valuation also appears attractive, with its NTM price-to-earnings multiple at 14, making it a potentially compelling buy.
Bank of Nova Scotia
My final pick is the Bank of Nova Scotia (TSX:BNS), which has been paying dividends since 1833. The company operates in over 20 countries, providing a range of financial services. Given its diversified revenue streams, the bank generates healthy cash flows, enabling it to reward its shareholders with consistent dividend payments. Additionally, BNS stock has increased its dividends at a CAGR (compound annual growth rate) of 5.6% over the past decade. Its quarterly dividend payout of $1.10/share translates into a forward dividend yield of 5.8%.
Moreover, BNS is focusing on expanding its business in Canada, the United States, and Mexico, while scaling back its operations in less profitable Latin American markets. The company recently acquired a 14.9% stake in KeyCorp for US$2.8 billion, enabling it to deploy its capital in its priority market cost-effectively and with lower risk. Notably, it is exiting its banking operations in Costa Rica, Colombia, and Panama by transferring them to Davivienda, while receiving a 20% stake in the combined entity. This transaction could lower BNS’s Common Equity Tier 1 ratio by 10-15 basis points.
Additionally, the Toronto-based financial services company announced in May that it would repurchase 20 million shares over the next 12 months. Considering all these initiatives, I believe BNS is well-equipped to continue paying dividends at a healthier rate. Furthermore, the stock trades at an attractive NTM price-to-earnings multiple of 10.6, making it a compelling buy.
