Canadian dividend stocks have always lured income investors, thanks to their attractive yields and stability. As inflation in North America remains sticky and rate cuts farther than expected, dividend stocks are continuing to gain market attention. In the first quarter of 2024, S&P/TSX Composite Total Return Index returned 6.6%, while the index’s return last year stood at 11.8%. Canadian stocks have been performing well this year. A detailed report by ClearBridge Investments said that nine out of 11 sectors in Canada posted positive returns in the March quarter, with healthcare, energy and industrials leading the pack.
Investors Becoming “Less Mindful” of Downside Risks
The report said that the AI-led rally that pushed stocks higher in later 2023 has shown its effects in 2024 as well. ClearBridge believes investors appear to be “less mindful” of downside risks in the market. The report said that some equity valuations are depicting “uncomfortably high” expectations. ClearBridge also said its Dividend Strategy underperformed its S&P/TSX Composite Total Return Index benchmark during the first quarter. The strategy was invested in nine sectors in the period, out of which six sectors generated gains. Energy, Financials and Industrials were the biggest contributors, while the Communication Services took a toll on overall returns.
While ClearBridge’s dividend strategy underperformed its benchmark index, there are several other Canadian dividend portfolios that have been posting upbeat returns. For example, The Morningstar Canada Income Pick List Strategy, which consists of high-yield Canadian dividend stocks with strong analyst ratings, outperformed the S&P/TSX 60 Index during the month of April, albeit with a thin margin. The strategy posted a return of -2.1% in April, compared to the benchmark’s return of -2.2%.
Analyst Recommends Canadian Dividend Stocks
Lorne Steinberg, President, Lorne Steinberg Wealth Management, during an interview with Bloomberg, recently recommended investors to pile into high-yield Canadian dividend bank stocks. The analyst said that over the past several months US banks and broader market ETFs have seen a huge inflow of funds, and Canadian banks have underperformed their US peers. However, Steinberg believes the market has “ignored” Canadian banks despite the fact that their performance is almost similar to their US peers, barring a few exceptions like JPMorgan. The analyst also said that Canada is still a “growth country” where the citizens are getting wealthier, which could bode well for Canadian bank stocks, which he believes would keep seeing earnings growth over the next few years.
Image by Steve Buissinne from Pixabay
Methodology
For this article we first scanned iShares S&P/TSX Canadian Dividend Aristocrats Index ETF holdings and listed down all stocks that have a significant number of hedge fund investors. To gauge hedge fund sentiment for stocks we used Insider Monkey’s proprietary database of 919 hedge funds updated for the first quarter of 2024. From these stocks we chose 8 Canadian dividend stocks with the highest number of hedge fund investors. We gave preference to the stocks that are trading in the US.
8. TC Pipelines LP Common Stock (NYSE:TRP)
Number of Hedge Fund Investors: 23
Energy infrastructure company TC Pipelines LP Common Stock (NYSE:TRP) is one of the high-yield Canadian dividend stocks popular among hedge funds. The stock has a dividend yield of over 7%. Despite this high dividend, TC Pipelines LP Common Stock (NYSE:TRP) has managed to grow its payouts at an annual rate of about 7% since 2000. TC Pipelines LP Common Stock (NYSE:TRP) is targeting 3%-5% annual growth, which is impressive given the company’s high dividend yield.
TC Pipelines LP Common Stock (NYSE:TRP) recently posted strong Q1 earnings. EPS in the period came in at C$1.24/share, up from C$1.21 in the year-earlier quarter. The figure also beat estimates of C$1.15.
The company’s management talked about dividends and other important financial metrics during Q1 earnings call:
“Dividends are expected to remain whole following the Liquids spin-off. In addition, we expect to have the capital structure in place prior to the spin-off, subject to a successful shareholder vote on June 4. Anticipated proceeds from the senior and subordinated debt issued at South Bow were used to repay approximately $7.9 billion of TC Energy debt and help meet future funding requirements. Our longstanding value proposition sets the foundation for continued operational and financial strength, insulating us well from volatility we see in the broader market.
Our stable, low-risk business model and highly utilized asset portfolio provide stability in our comparable EBITDA and cash flows. TC Energy’s Board of Directors has declared a second quarter 2024 dividend of $0.96 common share, which is equivalent to $3.84 per share on an annual basis. As we look ahead, both TC Energy and South Bow are expected to maximize respective value propositions in a manner that will benefit shareholders for years to come.”
Read the full earnings call transcript here.
7. Enbridge Inc (NYSE:ENB)
Number of Hedge Fund Investors: 32
With a dividend yield of about 7% and a PE ratio of 19, energy pipeline company Enbridge Inc (NYSE:ENB) is one of the most popular Canadian dividend stocks among elite hedge fund investors. Enbridge Inc’s (NYSE:ENB) dividend yield is almost twice the industry average of 3.5%. Enbridge Inc (NYSE:ENB) has increased its dividend without a break since 2003.
A total of 32 hedge funds tracked by Insider Monkey reported owning stakes in Enbridge Inc (NYSE:ENB). The biggest stake in Enbridge Inc (NYSE:ENB) is owned by Ken Griffin’s Citadel Investment Group which owns a $46 million stake in Enbridge Inc (NYSE:ENB).
6. Nutrien LTD (NYSE:NTR)
Number of Hedge Fund Investors: 33
Agricultural products, of crop inputs and services company Nutrien LTD (NYSE:NTR) is one of the most popular Canadian dividend stocks to buy according to hedge fund investors. A total of 33 hedge funds tracked by Insider Monkey reported having stakes in Nutrien LTD (NYSE:NTR) as of the end of the March quarter this year. Over the past three years, Nutrien LTD’s (NYSE:NTR) annual dividend growth rate is 7.20%. The stock has a dividend yield of about 3.5% as of May 24. Berenberg last month upgraded Nutrien LTD (NYSE:NTR) shares to Buy from Hold. Berenberg analysts believe the stock is poised to grow amid sales volume growth expectations.
During the first quarter of 2024, Nutrien LTD (NYSE:NTR) earned $0.46 per share, beating estimates by $0.08. Revenue fell 11.8% year over year to $5.39 billion, surpassing estimates by $210 million.
5. Brookfield Corp Class A (NYSE:BN)
Number of Hedge Fund Investors: 33
Canadian-based alternative investment company Brookfield Corp Class A (NYSE:BN) is one of the best Canadian dividend stocks to buy now for income investors based on hedge fund sentiment. As of the end of the first quarter of 2024, 33 hedge funds reported owning stakes in Brookfield Corp Class A (NYSE:BN). The stock has gained about 44% over the past one year. Brookfield Corp Class A (NYSE:BN) has been paying dividends consistently since 1997, and has a track record of increasing its payouts without a break since 2002. However, Brookfield Corp Class A (NYSE:BN) is a low-yield dividend stock.
4. Franco Nevada Corp (NYSE:FNV)
Number of Hedge Fund Investors: 36
Canadian-based Franco Nevada Corp (NYSE:FNV) is one of the best Canadian dividend stocks for income investors. The gold-focused royalty and streaming company has a dividend yield of about 1.1%. During the first quarter Franco Nevada Corp (NYSE:FNV) posted adjusted EPS of $0.76, surpassing estimates by $0.05. Revenue fell 7.1% year over year to $256.8 million, beating estimates by $7.77 million. Franco Nevada Corp (NYSE:FNV) has increased its dividends consistently since 2008.
White Falcon Capital Management stated the following regarding Franco-Nevada Corporation (NYSE:FNV) in its first quarter 2024 investor letter:
“Due to the rally in gold, the weight of precious metal royalty companies is on the higher side of our typical 10-15% allocation to them. We recently wrote an article for the Globe & Mail on Franco-Nevada Corporation (NYSE:FNV), a portfolio company, that can be accessed on our blog. We believe that royalties are a better way to express an opinion on gold as they pay a dividend and have optionality on both the price of gold as well as additional discoveries by operating companies. With debt and deficits increasing by the minute and the central bank’s inability to control inflation, we believe that it is prudent to have an ‘outside the system’ asset in the portfolio that can protect our purchasing power over time.”
3. Canadian Natural Resources Ltd (NYSE:CNQ)
Number of Hedge Fund Investors: 45
Calgary, Canada-based oil and natural gas company Canadian Natural Resources Ltd (NYSE:CNQ) is one of the best dividend stocks for income investors based on hedge fund sentiment. Canadian Natural Resources Ltd (NYSE:CNQ) has 45 years of consistent dividend increases under its belt. Over the past three years, Canadian Natural Resources Ltd (NYSE:CNQ) dividend growth rate came in at 29.60%. Canadian Natural Resources Ltd (NYSE:CNQ) also awards investors with special dividends as it did in 2022 when oil prices were elevated.
In the first quarter, Canadian Natural Resources Ltd’s (NYSE:CNQ) adjusted funds flow reached $3.1 billion, while adjusted net earnings from operations amounted to $1.5 billion. Out of this, $1.1 billion were paid in dividends.
2. Agnico Eagle Mines Ltd (NYSE:AEM)
Number of Hedge Fund Investors: 46
Canadian gold mining company Agnico Eagle Mines Ltd (NYSE:AEM) is one of the best Canadian dividend stocks for income investors based on hedge fund sentiment. As of the end of the first quarter of 2024, 46 hedge funds reported owning stakes in Agnico Eagle Mines Ltd (NYSE:AEM). The biggest stake in Agnico Eagle Mines Ltd (NYSE:AEM) is owned by Jean-Marie Eveillard’s First Eagle Investment Management which owns a $411 million stake in Agnico Eagle Mines Ltd (NYSE:AEM). Over the past five years Agnico Eagle Mines Ltd’s (NYSE:AEM) dividend growth rate stands at 33%, while its payout ratio is about 67%
Last month Agnico Eagle Mines Ltd (NYSE:AEM) posted solid Q1 results. Adjusted EPS in the period came in at $0.76 beating estimates by $0.16. Revenue in the quarter jumped 21.2% year over year to $1.83 billion, beating estimates by $50 million.
1. Waste Connections Inc (NYSE:WCN)
Number of Hedge Fund Investors: 51
Canadian waste management company Waste Connections Inc (NYSE:WCN) has a strong dividend growth history. Last year Waste Connections Inc (NYSE:WCN) upped its dividend by 11.8%. This was the thirteenth consecutive double-digit annual increase since Waste Connections Inc (NYSE:WCN) started paying dividends.
Insider Monkey’s database of 919 hedge funds shows that 51 hedge funds had stakes in Waste Connections Inc (NYSE:WCN) as of the end of March. The most notable stake in Waste Connections Inc (NYSE:WCN) is owned by Sharlyn C. Heslam’s Stockbridge Partners which owns a $401 million stake in Waste Connections Inc (NYSE:WCN).
Last month Waste Connections Inc (NYSE:WCN) reported strong Q1 results. Adjusted EPS in the quarter came in at $1.04, beating estimates by $0.04.
Conestoga Capital Advisors Mid-Cap Strategy stated the following regarding Waste Connections, Inc. (NYSE:WCN) in its first quarter 2024 investor letter:
“Waste Connections, Inc. (NYSE:WCN): Based in Houston, TX WCN is a leading provider of non-hazardous waste collection, transfer, disposal, and recycling services in the United States and Canada. WCN demonstrated strong fourth quarter results with increased revenues and earnings. The quarterly results showed strong solid waste pricing and margins. Investors may also be anticipating that the company continues to improve margins and free cash flow over the next 12-24 months.”
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Disclosure: None. This article is originally published at Insider Monkey.
