This investing strategy is particularly good for long-term investors looking to build their retirement income. Below, I’ll explain why I like this type of investing for serious investors.

Three top reasons to buy dividend stocks

First, dividend stocks are an easy way to build savings for your nest egg. In today’s environment, many employers are phasing out pensions, contract work is on the rise, and interest rates are perpetually low. 

These changing dynamics make it important for everyone to secure their own retirement and learn how to invest for income. A portfolio of dividend-growth stocks can provide safe retirement income that should keep up with inflation.

Second, companies that offer regular dividend hikes run mature and stable businesses. Rewarding investors regularly also tells us a lot about the management’s long-term philosophy. 

These are the companies that care about their reputation and want loyal investors. Through their long-term dividend plans, such companies attract large institutional investors looking for long-term, stable investments.

Third, and most importantly, regular increases in dividends also tell us about a company’s ability to predict its future. It’s highly unlikely that a reputable company begins paying a dividend and then decides to stop paying it the next quarter. 

Why Toronto-Dominion Bank?

So, keeping these benefits in mind, I believe Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock is the right choice if you plan to buy a top dividend-growth stock today 

TD has a long history of rewarding investors, and the lender has made its intentions public about future dividend hikes.

Among the top five Canadian banks, TD has a very attractive dividend policy, supported by strong growth momentum, and a significant retail banking operation in the U.S.

You may be surprised to know that TD has more retail branches in the U.S. than in Canada, with a network that stretches from Maine to Florida. 

With the COVID-19 pandemic, TD Bank’s earnings are under pressure due to the rising bad loans. But, in my view, this is the best time to buy TD stock cheap and earn a higher dividend yield.

Trading at $59.64 and with an annual dividend yield of 5.3%, TD stock is more than 20% cheaper than it was a year ago. After a 7% increase in its payout this year, TD stock now pays a $0.79-a-share quarterly dividend.

The bank is forecast to grow its dividend payout between 7% and 10% each year going forward — an impressive growth rate at a time when the 10-year government note is yielding less than 1%.

Despite all the negative developments related to global trade, Canada’s energy downturn, the financial crisis of 2008, and now the COVID-19 pandemic, TD has continued to pay dividends.   

Bottom line

If you’re on the hunt for a top dividend stock that could pay you for the rest of your life, you should definitely consider TD for its dividend growth and safety.

The post A Top Dividend Stock to Buy in August appeared first on The Motley Fool Canada.

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That means not putting your eggs in one basket. You should always try to buy stocks that could provide a hedge when the main market is under pressure. Pursuing a diversification strategy has become more important in this COVID-19 environment when uncertainty is high.

Unfortunately, there aren’t many top diversification opportunities available in Canada to TFSA investors. Here, the benchmark index is heavily exposed to energy, mining, and financial stocks.

That’s one big reason that TSX over the past 10 years didn’t produce much in returns, as commodities remained depressed, forcing investors to look elsewhere.

A top TFSA stock

Today, I want to introduce to you a top TFSA stock that could fit very well in any diversified portfolio. The Toronto-based Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) has a unique business model that allows investors to take exposure to the company’s very diversified operations.

BIP owns and operates utilities, transport, energy, and communications infrastructure companies globally. BIP manages a portfolio of about US$77 billion with assets spanning five continents.

The company manages utilities and power transmission system in North and South America. It has 37 ports in North America, the U.K., Australia, and Europe, and approximately 3,800 kilometres of toll roads in South America and India.

With all these acquisitions in the infrastructure space, the company’s main objective is to generate a long-term return of 12-15% on equity, while targeting annual distribution growth of 5-9%.

According to Brookfield, its strategy is to acquire high-quality businesses on a value basis, actively manage operations, and opportunistically sell assets to reinvest capital into the business.

470% return 

When you look at numbers, there is no doubt that the company has been successfully executing its plan. During the past 10 years, BIP stock has delivered 470% return, including dividends.

After a more than 45% surge since the March dip, BIP stock is trading at $57.50 with an annual dividend yield of 4.63%. At this level, some analysts don’t see much upside potential.

“BIP’s risk-averse (long-term contracts) and diversified business model (across industries and geographic locations) offers a stable cash flow stream with solid distribution growth,” Citi analyst Ryan Levine said in a recent note. “Despite our view on the stability and growth of BIP’s cash flow stream, the shares appear appropriately valued.”

But if your horizon is long term, BIP’s yield still looks attractive for your TFSA, even after the powerful rally.

The reason is that BIP generates predictable and growing cash flows that allow the operator to regularly hike dividends. In Canada, such an ideal combination is hard to find in a single company.

Bottom line

With its enduring competitive advantage, BIP is a top stock for any TFSA. These utilities, power lines, and toll roads require a lot of investment, and not everyone can challenge the company’s first-mover advantage.

The post Retirement Income: A Top TFSA Stock to Buy This Summer appeared first on The Motley Fool Canada.

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If you’re young, you’ve a great advantage to create wealth over the long run. And one of the best ways to do that is to buy top dividend stocks. 

I’m a great fan of companies that pay regular dividends and then gradually increase them. You can start slowly by buying dividend stocks that are undervalued and have wide economic moats. 

By identifying such top dividend stocks early in your life, you can build a portfolio that will give you regular returns in the shape of dividends and capital gains.

In Canada, some of the top dividend stocks are banks, gas and power utilities, real estate investment trusts, and telecom operators.

Pick the top names from these sectors and hold them over the long run. These companies distribute huge amounts of their income in dividends, and they grow these payouts every year as their profits rise.

Two examples of top dividend stocks 

Let’s take the example of Enbridge (TSX:ENB)(NYSE:ENB), North America’s largest pipeline operator.

Research has shown that the companies that provide basic services, such power and gas utilities, outperform in economic downturns and recessions. 

These companies continue to generate cash flows and distribute most of those inflows in dividends. Earning consistent dividends means you are still getting income while waiting for the markets to recover.

Enbridge stock, after falling 20% this year, is undervalued in my view. After this plunge, this top dividend stock is now yielding more than 7%, which is a great bargain.

The company operates across North America, fuelling the economy and fulfilling consumers’ energy needs. Enbridge moves nearly two-thirds of Canada’s crude oil exports to the U.S. 

Canadian banks offer another avenue for you to  earn a steadily growing stream of income. They are among the top dividend stocks in North America, benefiting from their balance sheet strength and their careful lending practices.

If you decide to buy bank stocks, consider Bank of Montreal (TSX:BMO)(NYSE:BMO), Canada’s fourth-largest lender.

After the current sell-off, its stock is about 25% cheaper than it was a year ago. With this weakness, its dividend yield has soared to about 6%. BMO is one of the top dividend payers that’s been growing payouts regularly. There’s a very strong possibility that the lender will continue to hike its payouts. The stock currently pays a quarterly payout of $1.06 a share.

Once you have bought some top dividend stocks, the next step is to keep re-investing your profit back and buy more shares. This step will unlock the power of compounding — one of the most important components of a successful long-term investing plan.  

Bottom line

A disciplined investment approach, picking top dividend-paying stocks, and holding them for a long time are the key components of your journey to become a successful stock investor.

The post Got $10,000? Buy Top Dividend Stocks That Are Selling Cheap appeared first on The Motley Fool Canada.

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After the COVID-19-triggered recession, many companies have cut their dividends to preserve cash. There is also considerable uncertainty regarding the pandemic’s future course. It’s still raging in the U.S. and globally, making the economic recovery much difficult.

In this uncertain economic environment, it makes sense for TFSA investors to only buy solid, top-quality stocks that have the power to weather this economic downturn. Today, I’ll analyze one such stock from Canada for your long-term investment.

Why top banking stocks?

In Canada, the nation’s top bank stocks should be on the top of your TFSA buying list. After the recent sell-off, their dividend yields have become attractive. But buying a stock with a high dividend yield often comes with a greater degree of risks. 

The stocks that pay higher returns might be facing intense competition, and their balance sheets could be loaded with debt. However, you can’t beat the market without taking some extra risks and buying stocks whose values are depressed due to some short-term issues. 

Canadian banking stocks have offered some of the best returns to long-term investors due to the strength of their businesses. In general, these stocks return between 40% and 50% of their income in dividends. If you’re interested in top banking stocks for your TFSA, the next step is to find the best opportunity available to you after this market crash.

Why CIBC?

In this market, I particularly like Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), the nation’s fourth-largest lender. Its stock is down about 13% this year and 9% in the past 12 months. 

CIBC stock is now trading around $93.54 at writing, offering an annual yield of 6.23%. That yield is much higher if you compare it with what you can earn on a savings account or GICs. But there are reasons for this underperformance.

The lender’s weakening earnings and its exposure to the nation’s mortgage market are some of the major factors that could keep its price depressed in the short run.

But I believe the period of this sluggish growth will be temporary. The monetary and fiscal support is reviving the Canadian economy quickly, and the pandemic is coming under control.

The bank’s provision for bad loans surged more than five-fold in the last earnings report as the lender’s profit declined. But CIBC said it was maintaining its quarterly dividend at $1.46 per share.

“Our capital position remains strong, giving us flexibility and resilience as we navigate the current environment and continue to advance our long-term client-focused strategy,” said CEO Victor Dodig in the eearnings release.

Short-sellers have also targeted CIBC in the past due to its vast exposure to the Canadian mortgage market, betting that a possible collapse in the housing market will sink the lender as well. That devastating scenario hasn’t played out, however, and is losing its appeal.

Bottom line

With an annual dividend yield of over 6% at the time of writing, CIBC stock has a compelling appeal for TFSA investors. Its current dividend yield is one of the best among the major banks with little risk of that being slashed.

The post A Top TFSA Stock to Buy With a Dividend Yield of 6% appeared first on The Motley Fool Canada.

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One proven strategy to make a meaningful contribution to your retirement goals  is to buy some of the best dividend paying TSX stocks. In this area, you can still find many TSX stocks selling cheap.

Investing in some of the best dividend stocks is worth pursuing when the rate of return on some of the safest investments is close to zilch. When rates are so low, it makes sense for Canadian retirees to buy dividend stocks with durable competitive advantages, strong recurring cash flows, and a clear bias to return capital to investors.

Which are the best TSX stocks to buy?

TSX stocks that fit nicely in this strategy include telecom operators, power and gas utilities and some of the nation’s top banks. These stocks are defensive plays, because these companies continue to pay dividends even when markets face a prolonged downturn.

Many telecom companies pay regularly growing dividends, allowing their investors to earn a bond-like income, even if the share prices don’t appreciate much.

With low interest rates making bonds themselves less attractive, telecom stocks have become more appealing.

Why Rogers Communications?

From the telecom space, one stock that is attractively priced these days is Rogers Communications (TSX:RCI.B)(NYSE:RCI). This TSX stock has underperformed the main index over the past 12 months, but the company is well positioned to recover quickly.

At the time of writing, Rogers stock is down 13% this year, hurt by the COVID-19-triggered sell-off. The main reason for this weakness is that the analysts are expecting weak growth in its wireless business — a main contributor to its growth.

While Rogers is Canada’s second-largest telecom company, it has the largest market share of the country’s growing wireless segment.

In April, Rogers withdrew its financial guidance and reported a drop in its first-quarter earnings and revenue. Those results provide an early glimpse of how the global health crisis could affect Canada’s largest telecom companies.

That said, traffic on their networks has risen sharply as people work, learn and entertain from home. Also, Rogers relies less on revenue from serving businesses, leaving it in a post-pandemic world.

“Like most businesses, COVID-19 will have an impact on our financial results in the short term,” company CEO Joe Natale said during the company’s annual shareholder meeting. “But the current environment does not affect the underlying strength of our company, nor the long-term, sustainable growth of our business,” he added.

Bottom line

Rogers Communications is a solid telecom stock that’s going through a little tough patch right now. But that weakness, in my opinion, is a buying opportunity for retirees. Rogers stock currently offers an annual dividend yield of 3.6%, with a good upside potential.

The post Retire Rich: This Is 1 of the Best TSX Stocks to Buy Now appeared first on The Motley Fool Canada.

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But that rally is recently showing some signs of fatigue in tandem with other high-powered growth stocks. Since reaching a record high of $1,457.90 on July 13, Shopify stock has fallen about 14%. At writing, it’s trading at $1,255.50, down 3%. 

This move to the downside has coincided with general weakness in the tech-heavy NASDAQ during the past week. The reasons: the surging coronavirus cases in the U.S. and investors’ worries about the ongoing earnings season.

Some states in the U.S., such as California, are re-introducing lockdown measures lifted only in May to curb the pandemic. Besides that ongoing concern about the virus and its impact on the economy, investors are also taking some risk off the table after an impressive rally in high-growth tech stocks since March.

Shopify stock: A solid growth story 

In the case of Shopify stock, this price acceleration has been so fast and furious that investors are now thinking that the current correction might linger on for some time and could deflate the bubble.

Shopify’s surge this year has made its stock the most valuable in Canada with the market capitalization of about $150 billion. The rise of such magnitude is raising concerns in the minds of some investors, who are wondering whether Shopify stock is a bubble that’s ready to burst.

In my opinion, these concerns are valid. No stock can go up forever. There are always risks of it overshooting, especially when there is so much cheap money available.

That being said, Shopify is a solid business, which is in a strong growth mode. Analysts expect the company to report 38% growth in its quarterly revenue when the e-commerce platform provider reports its latest numbers on July 29. 

With surging sales, Shopify’s gross merchandise volume, the key performance metric that represents the value of all goods sold on the platform, increased 46% to $17.4 billion in the first quarter. 

The company is at the centre of a major shift taking place in the market; consumers are shunning mortar-and-brick retail stores to buy online.

On the macro side, some analysts see more upside potential in tech stocks despite the recent run.

“We believe tech stocks could still go another 20% to 30% higher,” Wedbush analyst Daniel Ives wrote in a recent research note. “While fears of a second wave and a soft macro will cause volatility over the coming months, especially with earnings season around the corner, we remain firmly bullish on tech for the rest of the year.”

Bottom line

Shopify stock’s meteoric jump this year has been backed by earnings momentum and the company’s potential for future growth. But after that massive rally, its stock has become vulnerable to a correction, especially when there is too much cheap money chasing growth stocks and fuelling their prices.

But Shopify stock, in my opinion, will recover strongly from any pullback. Investors should be ready to deploy their dollars when the price becomes more attractive.   

The post Shopify (TSX:SHOP) Stock: Is the Current Sell-Off the Start of a Crash? appeared first on The Motley Fool Canada.

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Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) stock has lost 18% of its value so far this year, underperforming the benchmark S&P/TSX Composite Index.

But that weakness, in my view, is a buying opportunity for TFSA investors who want to earn a higher dividend yield from a dependable energy utility. 

The company operates across North America, fueling the economy and fulfilling consumers’ energy needs. Enbridge moves nearly two-thirds of Canada’s crude oil exports to the U.S., transports about 20% of the natural gas consumed in the U.S., and operates North America’s third-largest natural gas utility by consumer count

Enbridge is largely insulated from swings in commodity prices, as it sets prices for transporting oil and gas in long-term contracts. The latest recovery in oil prices shows that the worst is over for oil producers. That means their share prices should improve as economies reopen. 

Another reason to buy a dividend stock like Enbridge is that when interest rates fall, these stocks become more attractive. Enbridge, which currently yields about 7.7% a year, is offering quite an attractive risk/reward equation. Its current return is among the best you can earn from other Canadian utilities. Enbridge pays a $0.81-a-share quarterly dividend. 

Bank of Nova Scotia

Being in the lending business, banks’ fates are closely tied with the direction of the economy. That’s the reason their stock prices are depressed; some borrowers find it hard to pay back their loans. 

Despite this unfriendly economic environment for banks, I believe the right time to take a position in them is when their share prices are low.

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), trading at $57.23 and with an annual dividend yield of 6.36%, is one such stock to buy for your TFSA.

The third-largest lender is exposed to emerging markets and could see a few quarters of weakness. Its quarterly earnings plunged 41% after the lender set aside a record amount for loan losses in May, hurt by the coronavirus pandemic.

Chief Executive Officer Brian Porter has told analysts that he expects economic declines in the bank’s core markets for the balance of the year. The lender will return to growth in 2021 on a “gradual abatement of the pandemic” and reopening of economies, he says.

Over the long run, BNS has proven to be a good stock to buy with its growing payouts. The lender has returned cash to investors every year since 1832, while it has hiked its payouts in 43 of the last 45 years. Scotiabank pays a $0.90-per-share quarterly dividend.

Bottom line

I like both Enbridge and BNS for TFSA investors. I believe both stocks will emerge from the current phase of weakness, offering investors good upside potential.

The post Enbridge Vs. Bank of Nova Scotia: Which Stock Is a Better TFSA Buy? appeared first on The Motley Fool Canada.

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Why banks?

In Canada, the nation’s top bank stocks offer one avenue to explore for value investors. After the recent sell-off, their dividend yields have become attractive. But buying a stock with a high dividend yield often comes with a greater degree of risks. 

The stocks that pay higher returns might be facing intense competition, their balance sheet could be loaded with debt, and their management has no idea how to produce growth that will satisfy investors.

However, you can’t beat the market without taking some extra risks and invest in stocks whose values are depressed due to some short-term issues.

Canadian banking stocks have offered some of the best returns to long-term investors due to the strength of their businesses and their diversified operations.

In general, these stocks return between 40-50% of their income in dividends. If you’re interested in buying bank stocks for your Tax-Free Savings Account (TFSA), the next step is to find the best opportunity available.

Why is CIBC stock attractive? 

In this market, I particularly like Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), the nation’s fourth-largest lender. Its stock is down about 13% this year, even after recovering some ground in the post pandemic rally. CIBC stock is now trading at $93.40 at writing, offering an annual yield of 6.3%.

That yield is much higher if you compare it with what your TFSA could earn on a savings account, or GICs. But there are reasons for this higher yield.

The lender’s weakening earnings, exposure to the nation’s mortgage market, oil companies and the rising provisions for bad loans are hurting its stock.

CIBC’s profit plunged 71% in the second-quarter amid a surge in provisions for credit losses. But I believe the period of sluggish growth will be short term and the monetary and fiscal support will revive the Canadian economy quickly. 

“Our capital position remains strong, giving us flexibility and resilience as we navigate the current environment and continue to advance our long-term client-focused strategy,” said CEO Victor Dodig in a press release.

 “This will enable us to further diversify revenue streams, deepen client relationships and improve our efficiency as we continue to deliver value to our shareholders.”

There are already indications the worst of this economic downturn is over. Oil prices are recovering and the nation’s housing market is showing strength with no sign of distressed sales.

Bottom line

With an annual dividend yield of over 6.3%, CIBC stock is a good candidate for your TFSA dollars. Its current dividend yield is one of the best among the major banks. CIBC pays a $1.46-a-share quarterly dividend with a long history of consistent growth.

The post Got $5,000 to Invest? Buy This Beaten-Down Stock for Your TFSA appeared first on The Motley Fool Canada.

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This strategy is worth pursuing when the rate of return on some of the safest investments, such as GICs and bank savings accounts, is close to zilch. 

Let’s take the example of GICs. The best rate you can get these days on a five-year GIC is 2.3%, according to ratehub.ca.

When rates are so low, it makes sense for Canadian retirees to buy top dividend stocks with durable competitive advantages, strong recurring cash flows, and a clear bias to return capital to investors.

Which top stocks should you buy?

Top dividend stocks that fit nicely in this strategy include Canadian banks, utilities, and telecom operators. These stocks are considered defensive plays, because these companies continue to pay dividends even when markets face a prolonged downturn.

Many utilities, such as telecom companies, pay regularly growing dividends, allowing their investors to earn a bond-like income, even if the share prices don’t appreciate much.

With low interest rates making bonds themselves less attractive, utility stocks have become more appealing.

What makes BCE a top dividend stock?

Among the top-performing utilities stocks is BCE (TSX:BCE)(NYSE:BCE), Canada’s largest telecom operator with a massive moat — a term coined by Warren Buffett for companies with a strong competitive position.

This leading position in the industry means that retirees will continue to benefit, as the company rewards its investors with growing payouts each year.

The company is spending billions of dollars to improve its network and to get ready for the rollout of fifth-generation services in the coming years. The company spends roughly $4 billion annually on wireless and fibre network and service development.

That being said, BCE will get a hit on its earnings, as the COVID-19 pandemic reduces the usage of wireless networks and as consumers hold on to their old plans. During the first quarter, BCE’s wireless revenue fell 2% to $2.04 billion.

Overall, BCE’s revenue in the quarter fell 0.9% compared with last year, while adjusted net income was up 4% to $720 million.

Quebec-based BCE has three business units operating primarily in Ontario, Quebec, Manitoba, the Atlantic provinces, and the territories. Its wireline division offers data, internet, and TV services and accounts for about half of sales.

For retirees who depend on the company’s payouts, BCE has been a decent investment. During the past decade, the company has more than doubled its payout to $3.33 a share annually.

In 2020, BCE stock looks more appealing, as the Bank of Canada remains firmly on the sidelines, keeping bond yields low. Trading at $55.97 with an annual dividend yield of 6% at the time of writing, BCE stock is a top choice for retirees.

Bottom line

Even in this low-rate environment, retirees can still earn a better return to improve their retirement income. In order to achieve that goal, they need to buy some top-quality dividend stocks and hold them for a long time.

The post Retire Rich: A Top Dividend Stock to Buy Now appeared first on The Motley Fool Canada.

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If you’re in it for the long haul, then you should have a portfolio of stocks that gradually add to your wealth without you being worried about the daily market noise.

One way to achieve this goal is to buy dividend-growth stocks for your TFSA portfolio. These companies consistently reward investors by raising dividends, because they run businesses that have the ability to generate cash in both good and bad times. 

These regular payouts don’t look substantial, but if you apply the power of compounding, you’ll have substantial growth in your investment over time. Compounding is one of the most dominant forces available to individual investors. With enough time, it can turn our small dividend-growth portfolio into something very big. 

Once you’ve decided to put together an income-generating portfolio under your TFSA, the next challenge to overcome is to carefully pick dividend-growth stocks that are right for you. 

Top TFSA stocks

For the post-pandemic world, telecom utilities should be on top of your buying list. I like telecom stocks, because they have very simple business models that often produce very strong income flows for their investors.

What supports stability in their cash flows is that no matter what happens to the economy, we have to pay our internet and cellphone bills. These recurring cash flows allow these companies to keep hiking their payouts regularly. 

In this space, I like BCE (TSX:BCE)(NYSE:BCE), Canada’s largest telecom operator. The company has a massive moat that helps it to generate strong cash flows. This leading position in the industry means that TFSA investors will continue to benefit, as the company rewards its investors with higher payouts each year.

Trading at $55.09 at writing, BCE is yielding about 6% and pays a $0.8325-a-share quarterly dividend, which has been growing about 5% per year during the past decade.

Another stock that fits well in this investing strategy is Canadian National Railway (TSX:CNR)(NYSE:CNI). The company enjoys a unique competitive advantage in the North American economy. It runs a vast rail network that spans Canada and mid-America, connecting the Atlantic, the Pacific, and the Gulf of Mexico. This wide economic moat means CNR can defend its business, while continuing to pursue growth.

Another reason I like CNR stock is that it offers a great combination of growth and income. This combination is hard to come by, as the majority of income stocks have passed their growth phase; the main reason investors like them is to get a regular income stream.

Over the past 10 years, CNR stock has delivered about 300% growth, including dividends, to long-term investors. Currently, CN Rail is yielding about 2%, paying $0.575 a share quarterly dividend.

Bottom line

Companies that pay regular dividends and grow them over time make a great investment case for long-term investors. Holding these stocks and reinvesting their payouts back into the portfolio is a winning strategy for your TFSA. 

The post Top TFSA Stocks I’d Buy Right Now and Never Sell appeared first on The Motley Fool Canada.

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