Beyond the Banks: 3 TSX Dividend Stocks Most Canadians Ignore

These three TSX dividend stocks offer diversification, strong dividend yields, and strong growth profiles.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published June 25, 4:00 pm EDT

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Key Points

While Canadian banks dominate TSX dividend portfolios, three overlooked dividend stocks offer generous yields and strong growth potential: Capital Power, Tourmaline Oil, and Vital Infrastructure Property Trust.
Capital Power yields 3.72% with dividends up 119% since inception (5% CAGR), focused 90% on natural gas-fired generation to capitalize on booming electricity demand, while Tourmaline Oil yields 3.34% and commits to paying out all free cash flow as demand for North American natural gas surges from electrification, LNG exports, and data centres.
Vital Infrastructure Property Trust offers the highest yield at 6.56%, owning medical facilities with long, inflation-indexed leases that provide stable, recession-resistant income supported by favorable demographics from an aging population.

Canadian banks are well-known amongst investors. They have actually been the TSX dividend stocks that most investors have relied on for dividend income. However, there are other dividend stocks that are just as worthy, yet, they are ignored by most investors.

In this article, I’d like to introduce three TSX dividend stocks that have gone largely unnoticed. Yet they are at least worth considering for their generous dividend yields and strong businesses.

some REITs give investors exposure to commercial real estate — Source: Getty Images

Capital Power

Capital Power Corp. (TSX: CPX) is a growth-oriented North American power company. It’s focused on acquiring, owning, and operating renewable and thermal power generation facilities.

The company is increasingly focused on natural gas-fired generation, which involves burning methane to create electricity. This is the cheapest form of energy and highly efficient and reliable. It also has a booming demand profile. With a 90% natural gas weighting, it’s clear that this is where Capital Power’s focus lies.

At this time, Capital Power stock is yielding 3.7%. Also, the company’s dividends paid have increased 119% since its inception. This represents a 16-year compound annual growth rate (CAGR) of 5%. So, Capital Power stock has a healthy and reliable dividend plus strong dividend growth – a very valuable combination for dividend investors.

Tourmaline Oil

Another TSX dividend stock that investors tend to ignore is Tourmaline Oil Corp. (TSX: TOU). This stock is riskier than the Canadian banks. But it’s worth considering, as this natural gas producer is thriving today. This is being driven by the fact that North America’s natural gas is very much in demand at home and globally.

Here at home, power demand is rapidly rising as electrification accelerates. Also, liquified natural gas (LNG) demand is rapidly rising as countries are replacing coal with natural gas. Finally, data centres are emerging, driving up electricity demand.

These strong industry dynamics are evident in Tourmaline stock’s recent results. In the company’s first quarter, record production was accompanied by strong earnings and cash flow results. In response to strong global natural gas liquids pricing, the company’s cash flow forecasts are rising rapidly.

Tourmaline stock is yielding 3.3%. The company has committed to pay all of its free cash flow out in dividends. This has resulted in special dividends during the years when natural gas prices were strong. I expect more of this in the coming years as natural gas prices strengthen in response to the record demand that’s headed its way.

Vital Infrastructure Property Trust

Finally, the last TSX stock that I would like to point out is Vital Infrastructure Property Trust (TSX: VITL.UN). Vital Infrastructure is an owner and operator of medical facilities such as medical offices, rehabilitation centres, and diagnostic facilities.

Medical facilities are a highly desirable property type, as they provide a stable, reliable revenue stream that’s economically insensitive or defensive. These properties have long, sticky leases that are inflation-indexed. Finally, this group of real estate assets has a strong and favourable demand profile, as the aging population is supporting long-term demand.

Vital Infrastructure stock is currently yielding a very generous 6.6%.

The bottom line

In conclusion, while the banks have a place in one’s portfolio, the three TSX dividend stocks listed in this article also deserve consideration. They provide diversification, stronger yields and, in many cases, stronger growth profiles.