Are you looking for cash flow in bull AND bear markets? If so, you’ve got to find quality stocks that pay dividends, with solid competitive positions and low payout ratios that ensure the dividends will keep coming over the long term. In this article, I will explore five such stocks that can be bought on the Canadian markets.
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Brookfield Asset Management
Brookfield Asset Management (TSX: BAM) is a Canadian asset manager with a 4% dividend yield. The company has over a trillion in assets under management, on which it earns a massive amount of fee-related earnings each year. It raised an additional $67 billion this year; when deployed, this “dry powder” will cause BAM’s fee-related earnings to increase. Overall, I’m expecting good things from this stock.
TD Bank
The Toronto-Dominion Bank (TSX: TD) is Canada’s second biggest bank, and my single biggest stock holding. It currently yields about 2.8%, mainly because its stock price has more than doubled in a year and a half, taking the yield lower. Nevertheless, TD is still a quality dividend play by several metrics. It has a 54% payout ratio, meaning it can more than afford its dividend. The dividend has been growing at 4.9% per year over the last five years. The bank’s earnings were up 20% last quarter. Still, it had excellent capital and liquidity metrics, indicating conservatism. Overall, it’s a good stock.
Restaurant Brands International
Restaurant Brands International (TSX: QSR) is a Canadian-American restaurant stock with a 3.4% dividend yield. It owns Burger King, Tim Hortons, and Popeye’s Louisiana Kitchen. The growth-oriented company has been expanding these franchises around the world. For example, Tim Hortons, once a Canadian-only company, can now be found in Thailand, the U.S., and elsewhere. QSR is doing pretty well as a business, with its revenue up 9% and earnings up 6% in the last 12 months. It also has a 17% free cash flow margin and has been raising its dividend marginally over time (about a 3.8% CAGR over the last five years).
Fortis
Fortis Inc (TSX: FTS) is one of Canada’s all-time best performing dividend payers, with 52 consecutive dividend hikes under its belt, and a 3.2% current yield. The company has been raising its dividend for so long that most investors weren’t even alive when the dividend growth streak began.
Fortis is a very well-run utility. It regularly reinvests to increase its rate base, keeps its payout ratio below 100%, and manages its finances prudently. Over the years, the company has grown to acquire utilities all across Canada, the U.S., and the Caribbean. Today, it’s working on a capital expenditure program expected to grow its rate base by 6% per year.
Suncor
Suncor Energy Inc (TSX: SU) is a Canadian energy stock with a 2.9% dividend yield. I held this stock for about a year prior to this article coming out, having sold it just minutes prior to writing the article, after notifying my readers on X.
I sold the stock because I thought that the imminent end of the Iran war would drive the stock’s price lower. Nevertheless, I still think it’s a quality stock, and I’d probably buy back into it at something like $60.
Suncor is a great company, but I don’t think the conditions that took it all the way into the eighties will persist long term. I look forward to buying it back cheaper in the future.
