How I’d Invest $10,000 in Canadian Dividend Stocks

Canada is blessed with many dividend stocks. Canadian investors have no shortage of dividend stocks to choose from. However, investors still need to be choosy.

Just because a company pays a dividend doesn’t mean it is a good investment. You never want to buy a stock just for its dividend. You should buy a stock because it has a good business, a solid balance sheet, smart managers, and opportunities to grow your capital. The dividend is nice, but it should never be the investment thesis alone.

If you are looking for good businesses that also pay good (and safe) dividends, here are three stocks I’d split across three positions with $10,000 invested.

A cheap energy infrastructure stock with a growing dividend

If you must have an elevated dividend, Pembina Pipeline (TSX:PPL) looks attractive today. It has a 5% dividend yield today. Despite rising 13% in the past six months, Pembina stock has lagged other pipeline peers this year. However, that is where the opportunity lies.

With an enterprise value (EV)-to-earnings before interest, tax, depreciation, and amortization (EBITDA) of only 11, Pembina is one of the cheapest energy infrastructure stocks in Canada. It also happens to have one of the best balance sheets.

Not only does that help backstop its dividend, but it also provides non-dilutive capital for its growth funnel. Pembina has an important LNG terminal under construction right now. There are rumours that Pembina will soon sign a large-scale data centre power supply agreement.

For a stock growing by the mid-single digits with a nice dividend, Pembina is set to deliver a solid 10% annual total return. Its dividend is likely to grow by the low single digits for the next several years.

A REIT with an attractive dividend

First Capital REIT (TSX:FCR.UN) is a really defensive and passive way to own real estate. It operates 171 urban-focused, grocery-anchored properties across Canada. These are very high-end properties with a strong mix of essentials-focused tenants.

The company has 97% occupancy. Strong demand is driving rent up by a mid-single-digit rate every year. First Capital is cleaning up its portfolio and improving its balance sheet.

Given First Cap trades at a wide discount to its private market value, this stock could be put on sale one day. You get to collect a 4.6% distribution yield that is paid out monthly while you wait.

A waste provider is aggressively buying back shares

Another stock I’d be happy to have in my dividend portfolio is Secure Waste Infrastructure (TSX:SES). It may only yield 2% today, but you hold this stock for more than just the dividend.

Secure is a leading provider of waste and energy infrastructure in Western Canada. In many locations, it is the only provider of its specialized disposal services for energy and industrial markets. Even after rising 42% in the past six months, it still trades at an attractive discount to peers. The company is growing faster than most waste disposal peers and has more expansion opportunities.

Rather than growing its dividend, the company has been aggressively buying back stock given its discounted value. It bought back more than 20% last year and has bought back 7% of its stock so far this year.

The Foolish takeaway

If you have $10,000 to invest, split it across three to five stocks for a well-diversified portfolio. Don’t just look for yield. Look for good businesses that can deliver solid total returns for the long term. If you can pick them up at a discounted price today, then even better!