New investors often struggle with determining where to start dividend investing. Fortunately, the market gives us plenty of options to choose from, including some stellar picks, even if you only have $5,000.
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Start with a solid, defensive pick
One of the first investments to consider when starting dividend investing is a defensive stock. Defensive stocks continue to generate steady revenue (and by extension, dividends) even with the market slowing.
A prime example to consider for any dividend investing portfolio is Canadian Utilities (TSX: CU). Like the name implies, Canadian Utilities is a utility stock. Utilities generate a stable revenue stream that is generated thanks to their lucrative yet simple business model.
In short, Canadian Utilities provides utility services, and those services are bound by long-term regulated contracts. For as long as the utility continues to provide that service, it generates a recurring revenue stream.
That revenue stream leaves room for both growth in investments and paying a handsome dividend.
In the case of Canadian Utilities, the company pays out an impressive 4.7% yield. For those investors who have only $5,000 to start, that works out to an annual income of just over $230.
That’s not enough to retire on, but for those investors starting out, it is enough to acquire a handful of shares each year through reinvestments.
And that’s not even the best part.
Canadian Utilities has provided annual upticks to that dividend for 53 consecutive years without fail. That fact alone makes this a core option for those looking to start dividend investing.
Augment that portfolio with a solid income earner
Utilities are great defensive picks, but they rarely offer the highest yields to investors. What about an investment that boasts a similarly defensive pick but with a higher yield?
Enter Canada’s big telecoms, specifically, Telus (TSX: T).
Telus provides subscriber-based services to customers across the country across multiple segments. Those segments include wireless, wireline, internet, and TV.
In the years since the pandemic, the defensive appeal of Telus has only increased. Adding to that, the company is investing in growing its network. Telus has earmarked a whopping $70 billion infrastructure investment over the next five years.
That investment includes expanding fibre service and 5G service, which will greatly expand Telus’s customer base. Apart from its core subscription services, Telus also offers a growing digital services segment.
That business offers solutions to several niche segments of the market, including healthcare and agriculture.
Across all those segments, Telus generates a growing, reliable revenue stream that leaves room for growth and a very juicy quarterly dividend.
Investors looking to start dividend investing won’t be disappointed with Telus when it comes to dividends. As of the time of writing, the telecom offers investors a tasty yield of 7.4%.
For those investors with $5,000 to start out their dividend investing venture, that works out to an income of nearly $370. Again, not enough to retire on, but it is enough to generate over a dozen shares each year through reinvestments.
Top it off with some big bank income
No list of dividend-paying stocks would be complete without mentioning one of Canada’s big bank stocks. And for dividend investing, a big bank stock is the Bank of Nova Scotia (TSX: BNS).
Scotiabank isn’t the largest of the big banks, but it is the most international of the banks. And it’s that international segment that provides Scotiabank with ample growth appeal.
In recent years, the growth focus has shifted away from more volatile Latin American markets to North American markets. That includes a greater presence in the U.S.
While the bank has focused on switching its primary growth markets, the stock has lagged behind some of its peers. This makes it an ideal option for those starting a portfolio focused on dividend investing, as the stock trades at discounted levels.
It also means that Scotiabank’s dividend yield has swelled. As of the time of writing, the bank offers a tasty 5.7% yield.
Dividend investing made simple
No stock is without risk, including the trio of options mentioned above. Fortunately, the stocks mentioned above offer defensive appeal, juicy yields and growth potential.
In my opinion, one or all of the above should be core holdings in any well-diversified portfolio.
