In this article, we discuss the best Canadian dividend stocks to buy for 2022. You can skip our detailed analysis of the Canadian financial market, and go directly to read 5 Canadian Dividend Stocks to Buy for 2022.
Canadian stock market suffered heavily in the face of the pandemic as the S&P/TSX Composite Index fell by 37% between February and March 2020. However, the financial market is back on solid footing as the economy reopens. In October, Canadian stocks saw their longest streak of gains, as S&P/TSX Composite surged for a 14th straight session, surpassing the U.S. benchmark and adding $191 billion of value, as reported by Bloomberg.
Though the S&P/TSX Composite’s average annual return of 5.99% over the last 10 years lagged behind its counterpart S&P 500’s return of 17.1% during the same time, analysts noted that the difference is becoming thinner as investors have started to pay attention to Canadian stocks.
Moreover, in a recent development, the country’s financial regulators have permitted the banks to boost dividends, after lifting restrictions it imposed in March 2020 due to the pandemic. According to Bloomberg, the banks could raise dividends by as much as 25%, as they have saved a record amount of capital during the pandemic.
Historically, dividend stocks in Canada have generated better returns compared with non-dividend stocks. As reported by Highview Financial Group, S&P/TSX High Dividend Composite, an index focused on dividend income, returned 10.9% in the past 21 years, compared with a 6.8% return of Canada’s benchmark index during the same period.
While American dividend stocks like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), General Mills, Inc. (NYSE:GIS), and Johnson & Johnson (NYSE:JNJ) keep garnering all the attention, in this article, our focus would be on Canadian dividend stocks.
Photo by Artem Beliaikin on Unsplash
Our Methodology:
The stocks mentioned below are the Canadian companies that pay dividends. We considered dividend yields, analysts’ ratings, and basic fundamentals while picking these stocks.
10. The Toronto-Dominion Bank (NYSE:TD)
Number of Hedge Fund Holders: 17
Dividend Yield: 3.36%
The Toronto-Dominion Bank (NYSE:TD) is a Canada-based multinational banking and financial services company, founded in 1855. Recently, Wall Street analysts presented a positive outlook on the bank, as both Canaccord and National Bank raised their price targets on The Toronto-Dominion Bank (NYSE:TD) to C$102 and C$106, respectively.
The Toronto-Dominion Bank (NYSE:TD) is one of the best Canadian dividend stocks to buy as it holds a remarkable 164-year track record of consistent dividend payments. Moreover, the company has grown its dividend at a CAGR of 11% since 1995. In its fiscal Q4 results, The Toronto-Dominion Bank (NYSE:TD) posted an EPS of C$2.09, beating estimates by C$0.14. As of the close of December 14, the stock is up 30.9% year-to-date.
The number of hedge funds tracked by Insider Monkey holding stakes in The Toronto-Dominion Bank (NYSE:TD) stood at 17 in Q3, the same as in the preceding quarter. The value of these stakes is $294.3 million.
Like prominent stocks such as The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), General Mills, Inc. (NYSE:GIS), and Johnson & Johnson (NYSE:JNJ), The Toronto-Dominion Bank (NYSE:TD) is also gaining ground among income investors.
9. Royal Bank of Canada (NYSE:RY)
Number of Hedge Fund Holders: 16
Dividend Yield: 3.40%
Royal Bank of Canada (NYSE:RY) is a multinational financial services company and also the largest bank in Canada. The company has been paying dividends for 32 years, increasing its yield at an average of 5.62% annually over the past ten years. This makes Royal Bank a reliable dividend stock, just like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG) and Johnson & Johnson (NYSE:JNJ).
At the end of Q3, 16 hedge funds tracked by Insider Monkey held positions in the Royal Bank of Canada (NYSE:RY), down from 18 in the previous quarter. These stakes hold a consolidated value of over $1.1 billion, up from $905.4 million in Q2.
In fiscal Q4 2021, Royal Bank of Canada (NYSE:RY) reported revenue of C$12.38 billion, presenting an 11.6% growth from the prior-year quarter. Recently, Canaccord set a C$141 price target on Royal Bank of Canada (NYSE:RY), while maintaining a Buy rating on the shares. GQG Partners was the company’s largest shareholder, holding over 8.6 million shares.
Gator Capital Management mentioned Royal Bank of Canada (NYSE:RY) in its Q1 2021 investor letter. Here is what the firm has to say:
“We own a position in Royal Bank of Canada (“RBC”) and are completing our due diligence on several other Canadian banks. Royal Bank is the #1 bank in Canada. It has a business mix similar to JP Morgan Chase (“JPM”) with strong retail and corporate banking businesses. It also has a significant investment banking and asset management business. From here, we believe Canadian bank stocks will generate attractive returns for shareholders in the medium and long term.
Here is more detail on our investment thesis for Royal Bank of Canada:
- Bank with consistently high returns– RBC consistently posts Return on Tangible Common Equity (“ROTCE”) in the low 20%. In contrast, JPM has reported ROTCE between 12% and 19% over the last six years. We think this reflects the higher margins of the Canadian banking system.
- Leading bank in Canada– RBC is the leading bank in Canada. It has the highest returns, the highest market share, and the highest valuation of the five major Canadian banks. We believe other stock market investors will favor RBC when Canadian banks regain favor.
- Low relative valuation to US Banks– Canadian banks have had … [read the complete letter here]
8. Canadian Imperial Bank of Commerce (NYSE:CM)
Number of Hedge Fund Holders: 13
Dividend Yield: 4.18%
Canadian Imperial Bank of Commerce (NYSE:CM), a banking and financial services company, recently announced the use of Visa direct payouts to enable cross-border transactions as part of its Global Money Transfer Service. Since the start of 2021, the stock surged 31.2%, while its 12-month returns stood at 27.7%, as of the close of December 14.
On December 2, Canadian Imperial Bank of Commerce (NYSE:CM) announced a 10% increase in its dividend at C$1.61, with a dividend yield of 4.18%. The company’s 3-year dividend growth stands at 8.43%. In fiscal Q4 earnings, Canadian Imperial Bank of Commerce (NYSE:CM) earned C$5.06 billion in revenue, up 10% from the same period a year ago. Recently, National Bank set a C$165 price target on Canadian Imperial Bank of Commerce (NYSE:CM), while maintaining an Outperform rating on the shares.
As per Q3’s data of Insider Monkey, 13 hedge funds held stakes in Canadian Imperial Bank of Commerce (NYSE:CM), valued at $289.7 million. In comparison, 15 hedge funds were bullish on the stock in the previous quarter, holding shares worth $382.8 million. Among the smart money, D E Shaw was the company’s biggest shareholder in Q3, owning a $78.8 million stake.
7. The Bank of Nova Scotia (NYSE:BNS)
Number of Hedge Fund Holders: 17
Dividend Yield: 4.6%
The Bank of Nova Scotia (NYSE:BNS) is a multinational banking and financial services company. Currently, the company pays an annual dividend of $2.83 per share, with a dividend yield of 4.6%. According to analysts, the attractive yield mainly stems from a higher payout ratio of 46.83%.
The number of hedge funds tracked by Insider Monkey having stakes in The Bank of Nova Scotia (NYSE:BNS) increased to 17 in Q3, from 14 in the previous quarter. These stakes hold a consolidated value of $193.3 million.
Recently, TD Securities raised its price target on The Bank of Nova Scotia (NYSE:BNS) to C$95, while maintaining a Buy rating on the shares. As of the close of December 14, the stock surged 26.6% year-to-date. The fiscal Q4 earnings report of The Bank of Nova Scotia (NYSE:BNS) revealed an EPS of C$2.10, which beat the estimates by C$0.20. The earnings beat was driven by strong growth in its international banking.
6. TELUS Corporation (NYSE:TU)
Number of Hedge Fund Holders: 12
Dividend Yield: 4.46%
TELUS Corporation (NYSE:TU) is one of the largest telecommunications companies in Canada that provides multiple services related to the internet, entertainment, healthcare, and communications.
On November 5, TELUS Corporation (NYSE:TU) announced a 3.5% increase in its dividend at C$0.3274. The stock’s current dividend yield stands at 4.46%. The company has been increasing its dividend for the past year, which will likely continue in the coming years as well, according to analysts. In Q3 earnings, TELUS Corporation (NYSE:TU) posted an EPS of $0.29, which beat estimates by $0.01. Also, the company’s revenue for the quarter experienced a 6.8% year-over-year growth at $4.25 billion.
This November, CIBC lifted its price target on TELUS Corporation (NYSE:TU) to C$31, while keeping an Outperform rating on the shares.
At the end of Q3 2021, 12 hedge funds in Insider Monkey’s database were bullish on TELUS Corporation (NYSE:TU), compared with 13 in the previous quarter. These stakes hold a consolidated value of $141.2 million, growing significantly from $215.2 million in the preceding quarter. Jim Simons’ hedge fund, Renaissance Technologies, was the leading shareholder of TELUS Corporation (NYSE:TU) in Q3, owning over 3.3 million shares.
In addition to TELUS Corporation (NYSE:TU), investors are piling into other reliable dividend stocks like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), General Mills, Inc. (NYSE:GIS), and Johnson & Johnson (NYSE:JNJ).
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Disclosure. None. 10 Canadian Dividend Stocks to Buy for 2022 is originally published on Insider Monkey.
