Best Canadian Stocks

Canadian Depositary Receipts (CDRs)

Canadian Depositary Receipts (CDRs) are an investment product enabling Canadian investors to invest in U.S. stocks without currency risk. Even better, CDRs often trade at a smaller nominal price so Canadians participate in big US companies’ growth.

Are CDRs the 8^th wonder of the world? For many years, we have been used to the term ADRs (American Depositary Receipts) which were stocks issued by companies based outside of North America, but that wanted to access the U.S. markets. We cover a few of them at DSR, but we prefer investing in North America for several reasons. Earnings reports aren’t produced following the same calendar, information could be in a different currency, and there is usually a better (or as good) option on North American soil.

But CDRs are a bit different since they are U.S. based companies now trading on the Canadian market. Financial firms sweeten the deal by offering investors a hedge against currency fluctuations on top of buying fractional shares. In other words, instead of buying one share of Amazon at $3,000 USD, you can now buy one fractional share of Amazon on the NEO stock exchange for $19 CAD! So far, so good!

CDRs are offered by CIBC but can be bought through any online broker. CIBC doesn’t charge any management fees on CDRs, but there is a currency hedge fee capped at 0.60%. It’s not much, but this is something to consider. As you can see, there is a small difference in price fluctuations:

AMZN.NEO Canadian Depositary Receipt

However, the biggest difference lies within the currency fluctuation. As you can see, since AMZN Canadian Depositary Receipt was launched, the U.S. dollar gained almost 8% in value versus the Canadian dollar. In this situation, your currency hedge made you lose that 8% gain. CDRs’s currency protection goes both ways…

Do you get the dividend?

Yes, if you purchase CDRs, you will be entitled to the dividend paid by the company. Keep in mind that since you hold fractional shares, you will be entitled of the dividend in % (yield), not the dividend “per share” as declared by the company. For example, when Microsoft (MSFT) pays a dividend of $0.62/share for a 0.85% yield, you will receive the equivalent of 0.85% of your investment, not $0.62 per fractional share.

For tax consideration, dividends should be treated the same way as if you hold the original U.S. shares. Be sure to have the applicable W-8 form on file for the account holder.

What’s the catch on CDRs?

Honestly, it’s a great product and there is no catch. However, this will not change your entire life either.

Besides the hedging fee discussed previously, there are no real downsides of buying CDRs. Keep in mind the list of available companies is limited and it doesn’t include many dividend paying stocks. The complete list can be found here. If all dividend paying US stocks were available (as opposed to a little more than a dozen), I would be tempted to have only one Canadian account and buy only CDRs. Right now, I am still stuck with a USD account for most of my US holdings. Therefore, adding CDRs to my portfolio isn’t that revolutionary in my case.

ADVANTAGES	DISADVANTAGES
Simple (keep it in your CAD account)	Limited Choices (you will likely need a US account anyway), less liquidity
Small amount of money required (fractional shares)	CDRs realize any dividends and capital gains in U.S. dollars. We believe the same would apply to CDRs depending on where the security is held. (W-8 form).
Currency hedged	0.60% fees

An exclusive list of dividend growers with more potential…

Moose Markets presents the Canadian Dividend Rock Stars list: a selection of Canadian companies showing income and growth. You guessed it; we prefer a combination of dividend growth and dividend yield. The Canadian Rock Stars List is a selection of the safest dividend stocks in Canada.

GET THE LIST NOW

Canadian Banks Ranking

Canadian banks are amazing; they have outperformed the Canadian stock market for the past 5, 10, 15, probably 25 years. Unfortunately, they were not created equal. That’s a myth. Then, which Canadian Bank is the best?

Since the 2008 financial crisis, each member of the big six (Royal Bank, TD Bank, ScotiaBank, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank), took a different direction.

They all benefitted from the oligopoly environment in Canada to fund new growth vectors. 14 years later, if you pick the wrong bank, you will be leaving a lot of money on the table.

Let’s take a look at our Canadian Bank Ranking from position 6 to 1.

But first, let’s review their latest quarterly earnings:

#6 ScotiaBank (BNS.TO)

BNS is the most international bank in the Canadian banking industry. It has significantly expanded its business outside of Canada with 40% of its assets outside the Canadian border. This hasn’t always been an advantage as BNS ran into its share of problems with South American economic struggles. The bank reduced its international footprint and has limited it to 30 countries currently, from 54 in 2013. Expected GDP growth for these countries is quite attractive (higher than Canada and the U.S.), but this comes with much uncertainty and volatility. BNS is now a dominant player in Chile with its most recent acquisition of BBVA Chile in 2018. The bank has a strong track record of acquiring and integrating businesses. The most recent quarterly results show an economic recovery across the Pacific Alliance, a lower provision for credit losses, growth in wealth management, but lower income in capital markets.

Pros:

Best diversified, most international: For over a decade, BNS focused on growing outside Canada (especially in Central America and in South America). Obviously, their Gross domestic product (GDP) growth rate is better than US and Canada. Their perspective moving forward is also better (they should grow at a 3%-4% rate while it will be hard to reach over 1%-2% in Canada and the US).

Cons:

International exposure brings uncertainties: Before the pandemic, BNS had a great story, but they never capitalized on it, and they never outperformed other banks. Why? It’s complicated to do business in Central America! It took several years and several missed attempts for Canadian banks to enter the US. They made bad acquisitions and failed several times. Look at South America and Central America, you realize it’s a lot more complicated than making loans in the US. It’s even worse with the pandemic as countries with lower resources and weaker healthcare systems will face more problems than in North America.
Worst performing stock from the top 6 over the past 10 years. With all the difficulties I just mentionned, I’m not expecting them to reverse that trend in the upcoming months and the upcoming years.

#5 Canadian Imperial Bank – CIBC (CM.TO)

While CIBC lags behind the other banks on the stock market (along with ScotiaBank), it gives investors the opportunity to pick up a generous yield without significant risk. We like that they want to grow their wealth management division, but the integration of Private Bank will represent a crucial step. If an investor is looking for additional income, CM is probably one of the best picks on the Canadian stock market; it just can’t be expected to outperform the banking industry over the long run. CIBC is trading at a low PE ratio versus its peers since it has lower growth expectations. On the bright side, the dividend is not at risk, and an investor will enjoy consistent increases. CIBC will likely be a good fit for a retirement portfolio since it offers the stability of a top 5 Canadian bank with a decent yield and the security of future dividend growth. We must add that the bank has done very well in 2021 and its recent results pushed CM’s price to its highest price level in history. Let’s put it this way: it’s hard to perform poorly when you invest in a Canadian bank!

Pros:

High yield with a relatively low payout ratio: When you do the math, a low stock price brings a higher yield. A low PE ratio also brings a high yield and so the stock price is low…
Mortgage loans: The mortgage side is doing well as housing market in Canada is doing well. But when your biggest growth vector is mortgages right now, I don’t think it will result in outperforming the other banks.
Private banking and wealth management: Smart move, but a little late. CIBC is a small player in this ground compared to the others.

Cons:

Lack of growth vectors: With interest rates super low, interest margin will be squeezed. CIBC’s only way out is to do more loans. That could be a very difficult path in the next years considering the consequences of the pandemic on the economy.

#4 Bank of Montreal – BMO (BMO.TO)

BMO decided to take the stock market path to ensure its growth. It was the first Canadian bank with its own ETF on the market. Competition is fierce but being among the first Canadian issuers surely helped to build momentum in a growing market. Over the years, BMO concentrated on developing its expertise in capital markets, wealth management, and the U.S. market. BMO also made innovative moves such as the introduction of its own ETFs and a robo-advisor. Growth will happen in these markets for banks in the coming years. BMO is well-positioned to surf this tailwind. Keep in mind BMO’s results are often more hectic compared to its peers due to its capital market business segment. The bank has been the less generous in terms of dividend growth between 2010 and 2020. However, it came back strong with the most generous dividend increase in 2021 (more on that in the dividend growth potential section).

Pros:

Focus on capital markets and wealth management: They were the first in the country to have their own ETF suites. They saw where the market is going, and they took advantage of it. They were also among the first Canadian banks to make a move towards private banking with the acquisition of Harris Bank in Chicago. They’re well established in wealth management and in capital market and I like that.
Well established in the States.

Cons:

Revenue and earnings are more volatile: Because of that focus, their revenue and earnings are more volatile or riskier. Their dividend growth perspective versus the other five is lower.

#3 TD Bank (TD.TO)

Over the years, the bank has been increasing its retail focus, driven by lower-risk businesses with stable, consistent earnings. The bank enjoys number one or two market share for most key products in the Canadian retail segment. TD keeps things clean and simple as the bulk of its income comes from personal and commercial banking. It has substantial exposure in major cities like Toronto, Vancouver, Edmonton, and Calgary, combined with a strong presence in the US. With about a third of its business coming from the U.S., TD is the most “American” bank you’ll find in Canada, with roughly 1/3 of its business coming from south of the border. If you are looking for an investment in a straightforward bank, TD should be your pick as increasing retail focus, large market share in Canadian banking, and U.S. expansion are key growth enablers for TD Bank.

Pros:

Revenues (a third) coming from the US: They really caught up that game from their southern neighbors; they know how they want to deal; they have a great exposure over there.
Largest amount of assets in Canada.
Doing things simple but doing them the right way: They have been doing very well for the past 10 years.
Strong wealth management: Their segment from Ameritrade did very well, and now they’re selling to Charles Schwab.

Cons:

High exposure to mortgages: Hot markets such as Vancouver and Toronto could cool down a lot at one point in time. If we get into a housing bubble, then it’s going to be harder for TD.

#2 Royal Bank – RBC (RY.TO)

Royal Bank counts on many growth vectors: its insurance, wealth management, and capital markets divisions. These sectors combined now represent over 50% of its revenue. These are also the same segments that helped Royal Bank to stay the course during the pandemic. The company has made significant efforts in diversifying its activities outside of Canada and has a highly diversified revenue stream to offset interest rate headwinds. Canadian banks are protected by federal regulations, but this also limits their growth. Having some operations outside of the country helps RY to reduce risk and improve its growth potential. The bank posted impressive results for the latest quarters driven by strong volume growth and market share gains which offset the impact of low interest rates. As interest rates are expected to rise in 2022 and 2023, RY is in good position. Royal Bank exhibits a perfect balance between revenue growth.

Pros:

Battling with TD to be the largest bank in terms of assets: They’re well established across all of Canada.
Rouhly 50% of their revenue are coming from classic banking activities: Which means only 50% is subject to the interest rate squeeze.
The other half is about wealth management, capital market, and insurance: They have been able to do lots of cross-selling across those segments, they are maximizing their presence in the wealth management, and they had a huge deal with BlackRock for ETFs.
Outperformed the average bank in Canada in terms of market: Recently, they have also shown their strenght in terms of earnings.
Strong dividend growth policy in place: Don’t expect any dividend increase for the rest of 2020 from any banks. I’m pretty sure Royal Bank (and other Canadian banks too) will wait a little, see how things go, see how their loan book is being affected, and then they may resume in 2021 or 2022. Still, the dividend is safe.

Cons:

Royal Bank could also get hurt by a bearish housing market: This is a rather small downside considering RY’s strenght and ability to face headwinds.

#1 National Bank (NA.TO)

NA has targeted capital markets and wealth management to support its growth. Private Banking 1859 has become a serious player in that arena. The bank even opened private banking branches in Western Canada to capture additional growth. Since NA is heavily concentrated in Quebec, it concluded deals to do credit for investing and insurance firms under the Power Corp. (POW). The stock has outperformed the Big 5 for the past decade as it has shown strong results. National Bank has been more flexible and proactive in many growth areas such as capital markets and wealth management. Recently, NA is seeking additional growth vectors by investing in emerging markets such as Cambodia (ABA bank) and in the U.S. through Credigy. Can it have more success than BNS on international grounds? It looks like they may have found the magical formula to do so!

Pros:

One of the fastest growing wealth management businesses in the country: They have a very strong brand recognition there. Since they were doing a lot of loans in Western Canada, they actually opened private banking branches there too. Not regular branches where everybody can go, but selling points where private consultants and private bankers could be there for their clients.
Strong in capital markets: They’re very active on the market. This creates more volatility, as it is the case with BMO, but overall, they’ve been doing well, and they’re making more money.
International branch and US segment: In the international, they focused on Cambodia. They completed the purchase of ABA Bank over there. They’re trying to create growth outside of Canada, but they’ve selected emerging markets in Asia instead of South America.
Heavily based in Quebec: In the past, it was a reason to lie a little behind, but over the past 10 years, Quebec has proven its resiliency. They’re not dependent on energy to grow their economy; they have a Canadian economy similar to Ontario. They’re doing well. In the pandemic, Quebec has been hit with a lot of cases, but its economy seems to be on the way to recover faster than the other banks.

Cons:

International branch and US segment: We’re going to see how it goes. It’s not my favorite part of their business model but I like the fact that they try to diversify.

Final Thoughts

Canadian banks could be compared to the salt you use in your hearty fall soup. Some salt in it is making it tasty and great. Add too much salt and it is totally ruined. Act with the same caution for Canadian banks. Pick one or two, but don’t add too much in your portfolio!

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Best Energy Stocks to Buy in 2022

The world needs energy to function and the best energy companies are rewarding shareholders handsomely this year. The oil & gas industry has been fascinating investors for several decades. I guess this is due to the thrill coming from the next exploration results or an oil boom pushing stocks to record levels.

Where to find the best Oil & Gas Energy Stocks?

First, one must understand the differences across sub-sectors and activity types. The oil & gas industry is usually divided into three activities:

Upstream: This term represents all activities related to exploration and production. This is usually the phase where the commodity price is the most important. Companies will establish their financial projections based on a specific price (or cost) per barrel. Then, they will decide to explore (drill wells) or not depending on the likelihood of profitable operations.

Midstream: Midstream activities include the processing, storing, and transporting of oil & gas and their byproducts. This is where you will find pipeline-related businesses. The transportation and storage activities are usually more stable as they usually operate on long-term contracts with producers.

Downstream: this is the final step of the process including refining (to produce gasoline for example) and marketing the product (selling it to the end-customer). Don’t just think about gasoline, but all the other modified products such as liquefied natural gas, heating oil, synthetic rubber, plastics, lubricants, antifreeze, fertilizers, and pesticides

Sub-Sector (Industry)

Oil & Gas Drilling	Oil & Gas Midstream
Oil & Gas E&P	Oil & Gas Refining & Marketing
Oil & Gas Equipment & Services	Thermal Coal
Oil & Gas Integrated	Uranium

Energy Stocks Greatest strengths

Oil & gas stocks will raise passions and attract many investors during bull markets (especially after the boom in 2021). As the economy grows, demand for such products increases accordingly. Commodity prices go up, profits are skyrocketing, and dividends are generous. The problem is that it rarely stays that way.

The energy sector can generate great returns in your portfolio, but you will be required to follow this sector closely (and hopefully know what you are doing). If you can pick stocks during oil busts (as was the case back in March-April 2020), you will show double-digit (sometimes triple digit) returns. Since we do not employ a “buy and sell quickly” strategy, we rarely like energy stocks at DSR. They generally make unreliable dividend growers.

Finally, the energy sector is a great hedge against inflation. Along with other commodities, energy companies can easily pass price increases to their customers as it’s linked to supply vs. demand.

Energy Stocks Greatest Weaknesses

The energy sector is quite volatile and cyclical. This is not the best place to pick dividend growers. Many companies will attract investors with their high yield and generous promises, but they will eventually fail their shareholders. I’ve heard the best and the worst stories coming out of this sector. Therefore, it is crucial to do your homework prior to investing in the Energy sector.

The main problem with this sector is it is capital intensive and profits often depend on commodity prices. Companies have little to no control over the prices they receive for their oil or natural gas. Therefore, they spend billions on projects and hope the end price will remain profitable for several years.

Vertically integrated companies (upstream, midstream, and downstream) tend to maintain their dividend payments no matter what, but it is still a risky business. For example, BP (BP) had to cut its dividend after a major oil spill. Royal Dutch Shell (RDS.A or RDS.B) and Suncor (SU.TO / SU) also cut their distributions following the oil debacle in 2020.

As technology evolves, our demand for energy stagnates while our production capacity improves. In other words, don’t expect natural gas prices to rise anytime soon. All factors are combined to keep them at a low level.

How to get the best of it

The energy sector is the most cyclical of all. If you are courageous enough to ride the roller coaster, you can grab shares at highly depreciated prices every few years. If you would rather stay focused on a dividend growth investing strategy as we do here at DSR, you must be incredibly picky before investing a penny in this sector.

I prefer pipelines (midstream industry) as the most interesting opportunity in the energy sector. Pipelines are capital intensive and exposed to regulators and potential oil spills, but they also act as toll roads. The world needs energy and pipelines are the ones providing it.

This sector is more suitable for a growth investor. If you are retired and looking to enjoy a peaceful retirement, you may want to ignore this sector completely.

Target sector weight: Since this sector doesn’t offer the best dividend growers in town, I’d say that a 5% exposure should be enough (unless you like roller coasters!).

Best Energy Stocks to buy in September 2022

As a part of the hype around energy, stocks has faded, there are some great opportunities in this sector.

Canadian Natural Resources (CNQ.TO)

In a world where the West Texas Intermediate (WTI) trades at $75+ per barrel, CNQ would be a terrific investment (here is your cue since the WTI is trading way over $70 lately!). It is sitting on a large asset of non-exploited oilsands and reaches its breakeven point at a WTI of $35. What cools our enthusiasm is the strange direction oil has taken along with the fact that oilsands are not exactly environmentally friendly. Many countries are looking at producing greener energy and electric cars. This could slow CNQ’s ambitions. However, CNQ is very well positioned to surf any oil booms. The stock price has more than doubled in value since the fall of 2020. It has previously invested very heavily, and it is now generating higher free cash flow because of past capital spending. CNQ exhibited resiliency in 2020, and this merits a star in their book. This is also why it’s part of our Canadian Rockstars List!

Dividend Growth Perspective

On top of an impressive dividend growth streak of over 20 years, CNQ has recently shifted gears with highly generous dividend increases (another 28% in 2022!). CNQ has proven the resiliency of its business model and confirmed its ability to be a strong dividend grower. This is truly impressive. Now that the oil market has strengthened, CNQ should be able to generate healthy cash flows for years to come.

Enbridge (ENB.TO)

ENB’s customers enter 20-25-year transportation take or pay contracts. This means that ENB profits regardless of what is happening with commodity prices. ENB is also well positioned to benefit from the Canadian Oil Sands as its Mainline covers 70% of Canada’s pipeline network. As production grows, the need for ENB’s pipelines remains strong. Following the merger with Spectra, about a third of its business model will come from natural gas transportation. Enbridge has a handful of projects on the table or in development. It must deal with regulators, notably for their Line 3 and Line 5 projects. Both projects are slowly but surely developing. The cancellation of the Keystone XL pipeline (TC Energy) secures more business for ENB for its liquid pipelines. ENB now has a “greener” focus with its investments in renewable energy.

Dividend Growth Perspective

The company has been paying dividends for the past 65 years and has 27 consecutive years with an increase. Further dividend growth shouldn’t be as generous as compared to the past 3 years (10%/year). Management aims at distributing 65% of its distributable cash flow, leaving enough room for CAPEX. Look to their latest quarterly presentation for their payout ratio calculation. Management expects distributable cash flow growth of 5-7% annually. Therefore, you can expect a similar dividend growth rate. We have used more conservative numbers in our DDM calculation that are more in line with the 2021 and 2020 dividend increases of 3%. Here’s more about Enbridge’s dividend safety:

Topaz Energy Corp (TPZ.TO)

The company arrived on the market at the perfect moment (2021). Topaz was established through its key counterparty, Tourmaline Oil Corp (TOU.TO), from whom Topaz acquired its formative royalty and energy infrastructure assets in November 2019. Bolstered from this opportunity, Topaz now focuses on growth by acquisition to diversify its business model away from Tourmaline. In 2022, Liquid-rich natural gas royalties (paid by Tourmaline) should represent 50% of Topaz’s revenue. It will also count on conventional liquids royalties (~25%) and revenue coming from its infrastructure (25%). On top of acquisitions, we expect Topaz to exhibit strong organic growth as there are more projects being developed on their land. We appreciate the midstream business infrastructure projects representing 78% of revenues as they are based on take-or-pay contracts. This secures a portion of cash flow and brings more stability to a highly cyclical sector.

Dividend Growth Perspective

Topaz is a new company paying a new dividend and that makes it hard to predict what will happen next. The company has already increased its dividend several times, going from $0.21/share in 2021 to $0.26/share in early 2022, for a 24% total increase in less than 12 months. Free cash flow per share continues to increase by double-digits as Topaz surfs a strong oil & gas market. For 2022, management is confident that it will be able to increase its dividend by 8% while keeping its payout ratio within its target range of 60% to 90%.

TC Energy (TRP.TO)

TRP is making use of large amounts of capital to fuel its growth over the coming years. Its acquisition of the Columbia pipeline and its extension toward Mexico are just two examples of what is to come. The company recently funded $4.5B for its Southeast Gateway Pipeline project to compliment TRP’s existing natural gas footprint in Mexico. It enjoys long-term contracts (of an average of 14 years), which provide great cash flow stability over time. The pipepeline’s growth potential remains in its natural gas pipeline expansion. TRP is a good candidate for long-term investment. As is the case with Enbridge, an investor must make sure to track TRP’s rising debt level. The company has kept its focus on rewarding shareholders with generous dividend increases, and that focus should continue. Unfortunately, management revised its dividend growth policy at the end of 2021; it’s still generous, but it’s not what it used to be!

Dividend Growth Perspective

TRP has successfully increased its dividend annually since 2001. TRP exhibits a 5-year CAGR of 9% but management reviewed its intention to boost its payout by 3-5% CAGR going forward. This news disappointed the market toward the end of 2021. We haven’t changed our DDM calculations as we were already forecasting a 4% dividend growth rate before the announcement. The company’s growth is fueled by its massive investment program. At the current yield, this is a good candidate for a retirement portfolio.

Find Better Stocks on the Canadian market…

There are great stocks to buy in the Energy sector, but there is more on the Canadian market! Moose Markets presents you with the Canadian Dividend Rock Stars list: a selection of Canadian companies showing both income and growth. The Canadian Rock Stars List is a selection of the safest dividend stocks in Canada. Download the list for free here:

DOWNLOAD THE LIST HERE

Best Canadian Tech Stocks in 2022

Canada has produced some of the best tech stocks recently. Over the years, the Canadian technology sector has produced great success stories: Shopify (SHOP.TO) and Lightspeed (LSPD.TO) saw their stock price skyrocketing during the pandemic.

With rising interest rates and the risk of a recession, investors became concerned about the lack of profit, and the entire sector plummeted in 2022. This year alone, Shopify lost more than 70% of its value, and Lightspeed isn’t far behind, with 50% of its value lost since January. Let’s just say they are a little less stable than Canadian REITs 😉

Is there hope for Canadian tech stocks? There are several excellent companies in this sector, and we will discuss the best opportunities at the end of this article.

But first, why would you invest in Canadian tech stocks anyway?

Why Canadian Tech Stocks? Which ones are the Best?

There are dozens of giant American technology companies, such as Apple, Microsoft, and Alphabet (Google). Can you name one Canadian tech companies that can compete with the best?

Out of the 41 tech companies in Canada, there are only 6 of them with a market capitalization above $10 billion:

Shopify Inc: $61B.
Constellation Software Inc: $46B.
CGI Inc: $26.5B.
Open Text Corp: $13.7B.
Ceridian HCM Holding Inc: $13.4B.
TELUS International (Cda) Inc: $10.6B.

Investing in small capitalizations will add volatility to your portfolio. However, it also improves your chances of finding a stock that could show triple-digit returns. Over the past 3 years, we count 8 companies showing more than 100% total returns:

Converge Technology Solutions Corp: 619.6%
Maxar Technologies Inc: 309.9%
Tecsys Inc: 192.2%
MediaValet Inc: 182.2%
Sierra Wireless Inc: 175.1%
Vecima Networks Inc: 114.2%
Kinaxis Inc: 110.1%
The Descartes Systems Group Inc: 103.1%

Now that this sector dropped significantly in 2022, it’s time to look for some bargains!

Top 4 Canadian Tech Stocks for September 2022

We have gone through the entire list of tech stocks in Canada to find the best companies (you can find the complete list at the end of this article). To identify our top 4, we considered their business model, growth vectors, and ability to generate recurring revenue. Here are the best Canadian Tech Stocks for September 2022 in no particular order.

Sylogist (SYZ.TO)

Yield: 6.90%

Market Cap: $178M

Industry: Software Application

Sylogist Ltd. is a software company that provides enterprise resource planning (ERP) solutions, including fund accounting, grant management and payroll to public service organizations. The Company operates through Public Sector segment.

Investment Thesis

Who doesn’t like a company offering overall improvements in business processes, quality, and systems control through their services? Sylogist exhibits a strong model of growth by acquisition and has almost no debt! It also offers a surprisingly strong yield for a small high-tech stock. Through their Enterprise Resource Planning (ERP) solutions, SYZ can help both public and private companies manage their intellectual property. Knowing how to manage data is crucial for businesses, so SYZ is at the right place at the right time. We like their customer diversification and their appetite for making acquisitions, coming from their new CEO. One of the major downsides of a company like this is that small caps can be quite volatile on the market. For that reason, investors should proceed with caution, or buy the stock and forget about the transaction for a while. Please note that EPS has been affected by a one-time executive compensation change in 2020 and 2021.

Constellation Software (CSU.TO)

Yield: 0.24%

Market Cap: $44.9M

Industry: Software Application

Constellation Software Inc is a Canada-based company that develops and customizes software for public- and private-sector markets. The firm acquires, manages, and builds vertical-specific businesses. Its operations are organized in two segments: Public Sector and Private Sector. The portfolio companies serve various markets including communications, credit unions, beverage distribution, tour operators, auto clubs, textiles and apparel, hospitality, and community care. The firm has operations in North America, Europe, Australia, South America, and Africa.

Investment Thesis

You won’t buy CSU for its yield, but you will buy this strong Canadian tech stock for its growth potential. Constellation Software has developed a unique growth by acquisition strategy. The company focuses on acquiring small niche tech companies or companies in the vertical market software industry. They now operate hundreds of companies in a decentralized way. Constellation is the ultimate growth machine!

Telus International (TIXT.TO)

Yield: 0%

Market Cap: $10.6M

Industry: Software Infrastructure

TELUS International (Cda) Inc is a digital customer experience innovator that designs, builds, and delivers next-generation solutions. Its clients include companies across several verticals, including Tech and Games, Communications and Media, eCommerce and FinTech, Healthcare and Travel and Hospitality. The solutions offered by the company include Digital Experience, Customer Experience, Advisory services, and Back Office and Automation among other services. Geographically, it derives a majority of revenue from the Philippines.

Investment Thesis

TELUS International is a spin-off company from Telus, the wireless company. Its focus on new technology and artificial intelligence opens the doors to a lot of growth in the future. We like TIXT’s geographic and service diversification. Being present in so many industries worldwide ensures a more stable business model. Revenues are expected to grow double-digit in the coming years.

Tecsys (TCS.TO)

Yield: 0.77%

Market Cap: $520.3M

Industry: Software Application

Tecsys Inc is engaged in the development and sale of enterprise supply chain management software for distribution, warehousing, transportation logistics, point-of-use and order management. It also provides related consulting, education and support services. The company serves healthcare systems, services parts, third-party logistics, retail and general wholesale distribution industries. Geographically, it derives a majority of revenue from the United States and also has a presence in Canada and Other Countries. Its only operating segment being the development and marketing of enterprise-wide distribution software and related services.

Investment Thesis

This small cap has much capital gain potential but a prospective investor should brace themselves for a roller coaster ride. TCS offers crucial supply chain management software for any ecommerce business. Considering delivery fees and the fierce competition in the retail world, optimizing the supply chain is a key element for any business shipping goods. Tecsys also helps large customers with complex distribution centers or in the healthcare business. With an only 15% market share of the healthcare market, there would appear to be much potential growth in that market. With over 1,000 customers and about half of their revenue coming from recurring contracts, TCS is building a strong foundation for its future growth. We like how annual recurring revenue (ARR) grows constantly and how TCS uses cross-selling techniques to obtain a net retention rate above 100% year after year.

There are better opportunities on the Canadian market…

There are great stocks to buy in the tech sector, but there is more on the Canadian market! Moose Markets presents you with the Canadian Dividend Rock Stars list: a selection of Canadian companies showing both income and growth. The Canadian Rock Stars List is a selection of the safest dividend stocks in Canada. Download the list for free here:

DOWNLOAD THE LIST HERE

The Complete list of Canadian Tech Stocks

If you are really curious, we have made a list of all tech stocks trading on the TSX. We have taken down the Canadian tech stocks with a market cap under $100M to make your research easier.

Symbol	Name	Industry	Market Cap	YTDReturns	Dvd Yield
SHOP.TO	Shopify Inc	Software – App	61,047	-72.37%	0.00%
CSU.TO	Constellation Software	Software – App	46,092	-7.20%	0.24%
GIB.A.TO	CGI Inc	Info Tech Services	26,476	-0.85%	0.00%
OTEX.TO	Open Text Corp	Software – App	13,683	-14.65%	2.21%
CDAY.TO	Ceridian HCM Holding	Software – App	13,374	-33.91%	0.00%
TIXT.TO	TELUS International	Software – Infra	10,627	-4.43%	0.00%
DSG.TO	The Descartes Systems	Software – App	7,843	-11.58%	0.00%
NVEI.TO	Nuvei Corp	Software – Infra	6,283	-45.77%	0.00%
BB.TO	BlackBerry Ltd	Software – Infra	5,068	-25.72%	0.00%
KXS.TO	Kinaxis Inc	Software – App	4,539	-7.28%	0.00%
LSPD.TO	Lightspeed Commerce	Software – App	3,986	-47.51%	0.00%
MAXR.TO	Maxar Technologies Inc	Communication Equip	2,527	-8.85%	0.15%
LWRK.TO	LifeWorks Inc	Software – App	2,251	29.28%	2.41%
ENGH.TO	Enghouse Systems Ltd	Software – App	1,843	-30.51%	2.08%
CLS.TO	Celestica Inc	Electronic Components	1,795	3.33%	0.00%
SW.TO	Sierra Wireless Inc	Communication Equip	1,546	77.89%	0.00%
CTS.TO	Converge Tech Solutions	Info Tech Services	1,500	-35.79%	0.00%
DCBO.TO	Docebo Inc	Software – App	1,456	-47.87%	0.00%
SFTC.TO	Softchoice Corp	Info Tech Services	1,299	4.29%	0.00%
DND.TO	Dye & Durham Ltd	Software – Infra	1,220	-60.61%	0.42%
IE.TO	Ivanhoe Electric Inc	Software – App	1,185	-8.86%	0.00%
ET.TO	Evertz Technologies Ltd	Communication Equip	1,096	12.17%	5.01%
CVO.TO	Coveo Solutions Inc	Software – Infra	769	-55.27%	0.00%
TC.TO	Tucows Inc	Software – Infra	747	-34.68%	0.00%
ABST.TO	Absolute Software	Software – App	684	15.50%	2.39%
TCS.TO	Tecsys Inc	Software – App	527	-30.96%	0.76%
CPLF.TO	Copperleaf Technologies	Software – Infra	474	-71.66%	0.00%
REAL.TO	Real Matters Inc	Software – App	427	-29.40%	0.00%
VCM.TO	Vecima Networks Inc	Communication Equip	409	24.54%	1.24%
CMG.TO	Computer Modelling	Software – App	372	10.85%	4.32%
EINC.TO	E Automotive Inc	Software – App	327	-62.58%	0.00%
MAGT.TO	Magnet Forensics Inc	Software – App	296	-24.70%	0.00%
ALYA.TO	Alithya Group Inc	Info Tech Services	281	-8.02%	0.00%
STC.TO	Sangoma Technologies	Software – Infra	263	-43.68%	0.00%
PAY.TO	Payfare Inc	Software – Infra	225	-42.65%	0.00%
QTRH.TO	Quarterhill Inc	Communication Equip	217	-28.77%	2.63%
TSAT.TO	Telesat Corp	Communication Equip	194	-56.42%	0.00%
QFOR.TO	Q4 Inc	Software – App	178	-47.06%	0.00%
SYZ.TO	Sylogist Ltd	Software – App	173	-42.12%	6.90%
THNC.TO	Thinkific Labs Inc	Software – App	158	-77.67%	0.00%
HAI.TO	Haivision Systems Inc	Software – Infra	151	-24.86%	0.00%

Canadian Dividend Aristocrats 2022

What’s a Canadian Dividend Aristocrat?

It’s a Canadian company showing 5 consecutive years with a dividend increase. Aristocrats are solid companies with a robust balance sheet. More on the specifics below.

Why it’s important to you?

Dividend growers tend to outperform the market over a long period of time and do it with less volatility. Dividend growers = more money, less stress. Investing in Canadian dividend growers should lead to recurrent investment income and help you achieve your retirement goals.

Can you invest in any Canadian Dividend Aristocrats and make money?

NO, but this Canadian Dividend Aristocrats guide will not only provide you with a list of stocks, but it will come with a methodology to select the right companies for your portfolio. We will also provide you with our favorite aristocrats.

Canadian Aristocrats and the U.S. Dividend Aristocrats

The Canadian dividend aristocrats is the little brother of a much larger and world-known dividend grower list. Dividend growth investors are familiar with the popular U.S. Dividend Aristocrats List. This list of dividend growers with over 25 consecutive years of dividend increases is famous around the world. What about Canadians? Do we have companies showing 25+ years of consecutive dividend increases?

While Canada does have a few companies that achieved that feat, the Canadian dividend aristocrats list would be too short if we would include them based on the US requirement. Canadian Aristocrats are companies that have increased their dividends for 5 consecutive years.

While many investors may think this is not enough to give an elite title to a company, I tend to disagree. I love picking stocks that have just started increasing their dividends and are on their way towards a great future. This is a unique opportunity for investors to select high-quality companies and still enjoy stock price appreciation going forward. We all wish we bought shares of Coca-Cola (KO) 50 years ago when it was a young dividend grower. You have a similar opportunity with the Canadian dividend aristocrats.

Skip directly to the good stuff, download our Dividend Rock Star List here:

Which Canadian stocks are Dividend Aristocrats?

As opposed to the U.S. Aristocrats, Canadian companies don’t have to show 25 years of consecutive dividend increases. In fact, even the 5 years minimum requirement isn’t as strict as we would think. Here’s the short list of requirements Canadian companies must meet to earn the Aristocrat title:

The company’s common stock must be listed on the Toronto Stock Exchange and be a constituent of the S&P BMI Canada. Stocks listed on the TSX venture, aren’t eligible.
The company’s market capitalization (Float-adjusted) must be at least $300M. We want companies of a minimal size. Yet $300M is quite permissive.
The increase in regular cash dividends for 5 consecutive years, but companies could pause their dividend growth policy for a maximum of 2 years within a said 5-year period. In other words; as long as the company intends to share the wealth, it has a good chance of being included among the elite dividend growers.

Canadian aristocrats Vs. U.S. aristocrats

Needless to say, it is easier to become a Canadian aristocrat than a U.S. aristocrat! To become a U.S. aristocrat, companies must:

Be a member of the S&P 500
Show 25+ consecutive years of dividend increases
Meet certain minimum size & liquidity requirements

It would be foolish to think selecting any aristocrats out of the list would make a good investment. On both sides of the border, we regularly see companies getting added or withdrawn for the list. This means the list you see in 2020 is those only who survived the test of time.

This article will not only provide you with a list of promising stocks, but it will also come with a methodology to select the right companies for your portfolio.

What are the Canadian dividend Aristocrats for 2022?

The list below contains 87 Canadian Dividend Aristocrats as of 2022. That’s a lot of companies that survived the 2020 pandemic. They are among the best Canadian dividend stocks. However, this list can be expected to change following the current pandemic situation. Dividends are one of the items companies tend to cut when feeling liquidity pressure.

You will also find very few Technology sector companies on the list as that sector has never been known for their steady cash payments to shareholders. You will, however, find many Financial Services companies along with some Industrials. Those two sectors have been and continue to be well-established dividend payers.

3 Steps to select the right aristocrats for your portfolio

As previously mentioned, going “all-in” with Canadian aristocrats may not make your portfolio any better. After downloading the Canadian dividend aristocrat lists, you can apply the following steps to ensure you pick only the best stocks possible.

#1 Focus on the sector you need

Whenever you isolate certain metrics, you will notice that certain sectors will be generally strong. This is because each sector thrives or faces tailwinds at different times. The timing of your research will determine which sector offers you the best opportunities. Unfortunately, you can’t buy all your stocks from the same sector. The DSR recession-proof workbook will guide you in this regard.

I would rather buy the best of breed for each sector than buy 4 stocks from the same industry. This will help my diversification and smooth my total returns over time. For example, the fact I had many tech stocks in my portfolio protected me to some extent from the March 2020 crash. Tech, utilities and consumer defensive stocks held the fort while my financials, industrials and consumer cyclicals were getting killed. Even more importantly, that diversification helped my portfolio bounce back relatively quickly.

#2 Start with the dividend triangle

If you have been following me for a while, you know that I’m a big fan of what I call the Dividend Triangle. This simple focus on three metrics will reduce your research time and help you target companies with more robust financials. I start all my searches with a look at companies showing strong revenue growth, earnings growth and dividend growth over the past 5 years. The detailed explanation is found in our recession-proof workbook, and I invite you to read and re-read that workbook as necessary.

First, download the Canadian dividend aristocrats list. Then, in a few simple clicks, you will set the filters and you can start hunting for the best stocks for you at that moment in time.

By selecting only companies showing positive numbers in the 5yr Rev growth, 5yr EPS growth and 5yr Div growth columns, you will find those companies with a positive dividend triangle.

This methodology covers all “regular companies”, but not REITs and other businesses that use non-conventional metrics instead of EPS. We will address those types of companies later in this letter.

#3 Priority to dividend growth, not yield

Now that you have narrowed down the number of stocks, it is time to trim that list further. Throughout the years, most of my best stock picks have been found amongst the strongest dividend growers. When you think about it, it totally makes sense. Those companies must earn increasing cash flows and show several growth vectors to be confident enough to offer a 5%+ dividend increase year after year.

Past dividend growth is a result of several good metrics at the same time. This usually means stronger revenue, consistent earnings growth, increasing cash flow and debt that is under control. We’ll dig into the other metrics later, but at first glance, a strong dividend grower will likely come with other robust metrics.

While not all my holdings show such strong dividend growth, I always search for the strongest dividend growers when selecting a new stock for my portfolio.

Using this simple 3 step methodology will narrow down your search to a few stocks per sector. It will make your final selections easier and your portfolio will likely perform better over the long run.

How to Calculate a Fair Value for Canadian Dividend Aristocrats

Valuation does play a major role in the buying process. However, this should not be the single factor that determines whether you buy or not. This is one factor among many. To be honest, I would rather buy an “overvalued stock” with a strong dividend triangle, great growth vectors and lots of potential for the next 10 years than buying an “undervalued stock” that has nothing else but a good yield and a poor valuation.

When I find a company I really like, but the valuation seems ridiculous, I’ll be tempted to put it on a watch list and wait for a while. I usually build this watch list on the side and when I’m done with one of my current holdings (e.g. the company doesn’t meet my investment thesis anymore), I pull out the watch list and check to see if valuations have changed. Once again, I’ll pick any “Alimentation Couche-Tard” (overvalued, strong growth) over any “Suncor” (undervalued, modest growth) of this world.

PE Ratio

At DSR, we use mostly two methodologies to determine a stock’s valuation. The first one is to consider the past 10 years of price-earnings (PE) ratios. This will tell you how the stock is valued by the market over a full economic cycle. You can then determine if the company shares enjoyed a PE expansion (price grows faster than earnings) or if the company follows a similar multiple year after year.

Dividend Discount Model

When you look at stocks offering a yield of over 3% with a stable business model, the dividend discount model (DDM) could be of great use. Keep in mind the DDM gives you the value of a stock based solely on the company’s ability to pay (and grow) dividends. Therefore, you will find strange valuations when you look at fast-growing companies with low yields (e.g. Alimentation Couche-Tard!). Find out more about the DDM model and its limitations here.

While the idea of receiving dividends each month is seducing, this is not what makes dividend growth investing magic. It’s the combination of capital growth and dividend growth (read total return) that truly generates the magic in your portfolio. You can download the complete list with additional metrics such as P/E ratio, dividend growth, dividend yield, revenue growth, etc. by clicking on the following button.

Best Canadian Dividend Aristocrats for 2022

Searching through almost 100 stocks could become tiresome. Using the Dividend Stocks Rock investing methodology, I’ve selected my favorite Canadian Dividend Aristocrats. You can download a complete eBook on our best Canadian Aristocrats here.

Alimentation Couche-Tard (ATD.TO)

Business Outlook

In the long-term, dividend payouts should grow in the double digits, and investors should see strong stock price growth. ATD’s potential is directly linked to its capacity to acquire and integrate additional convenience stores. Management has proven its ability to pay the right price and generate synergies for each acquisition. ATD exhibits a solid combination of the dividend triangle: revenue, EPS, and strong dividend growth. The company counts on multiple organic growth vectors such as Fresh Food Fast, pricing & promotion, assortment, cost optimization and network development.

The mediocre 0.80% dividend yield is so low that ATD shouldn’t even be considered as a dividend grower. However, the dividend payout has surged in the past 5 years (+144%) and the stock price jumped by over 75% (taking into account the stock price drop in early 2020). The only reason the dividend yield is so low is that ATD is on a fast track to growth. ATD will continue steadily increasing its payout while providing stock value appreciation to shareholders.

Potential Risks

Growers by acquisition are all vulnerable to occasionally making a bad purchase. While ATD’s method of acquiring and integrating more convenience stores has proven successful, it is important for them to not grow too fast or become too eager, leading them to possibly overpay in the name of growth. The company acted in this way when they tried to acquire French grocery store Carrefour. Still, we don’t think the next acquisition should be a source of concern with the current management team. Since then, no other deal was on the table and ATD didn’t get as many accolades from the market. Investors are also worried about the potential impact of electric vehicles on fuel sales, but we believe ATD will overcome this challenge by installing superchargers.

Canadian National Railway (CNR.TO)

Business Outlook

Canadian National has been known for being the “best-in-class” for operating ratios for many years. CNR has continuously worked on improving its margins. The company also owns unmatched quality railroads assets. CNR has a very strong economic moat as railways are virtually impossible to replicate. Therefore, you can count on increasing cash flows each year. Plus, there isn’t any more efficient way to transport commodities than by train. The good thing about CNR is that you can always wait for a down cycle to pick up some shares. There’s always a good occasion around the corner when we look at railroads as attractive investments. Finally, the cancellation of the Keystone XL pipeline will drive more oil transportation towards railroads. CNR will benefit from this tailwind. CNR lost the bidding war for Kansas City Southern (KSU) to Canadian Pacific. Management is being challenged and we should see better growth ideas emerge out of this drama.

CNR has successfully increased its dividend yearly since 1996. The management team makes sure to use a good part of its cash flow to maintain and improve railways while rewarding shareholders with generous dividend payments. CNR shows impressive dividend records with very low payout ratios. While the business could face headwinds from time to time, its dividend payment will not be affected. Shareholders can expect more high-single-digit dividend increases.

Potential Risks

Railroad maintenance is capital intensive and could hurt CNR in the future. There is a difficult balance to reach between an efficient operating ratio and well-maintained railroads. Continuous (and substantial) reinvestments are required to maintain its network. However, CNR continues to show one of the best operating ratios in the industry. CNR’s growth could also get hurt from time to time as it depends on Canadian resource markets. When the demand is low for oil, forest, or grain products, CNR will obviously slow down accordingly. We saw how quickly the wind turns. For example, the pandemic caused a slowdown in weekly rail traffic of about 10% during the summer of 2020. When the oil price is low, trucking takes some business away from railroads. CNR is a captive of its best assets. You can’t move railroads!

Fortis (FTS.TO)

Business Outlook

Fortis invested aggressively over the past few years, resulting in strong and solid growth from its core business. You can expect FTS’s revenues to continue to grow as it continues to expand. Bolstered by its Canadian based businesses, the company has generated sustainable cash flows leading to 4 decades of dividend payments. The company has a five-year capital investment plan of approximately $20 billion for the period of 2022 through 2026. Only 33% of its CAPEX plan will be financed through debt, while 61% will come from cash from operations. Chances are that most of its acquisitions will happen in the US. We also like the company’s goal of increasing its exposure to renewable energy from 2% of its assets in 2019 to 7% in 2035. The yield isn’t impressive at 3.30%, but there is a price to pay for such a high-quality dividend grower.

Management increased its dividend by 6% like clockwork for the past 5 years and has declared that it expects to increase dividends by 6% annually until 2025. We like it when companies show motivation for growth (through acquisitions) and reward shareholders at the same time. After all, Fortis is among the rare Canadian companies who can claim to have increased their dividend for 48 consecutive years. Fortis is a great example of a “sleep well at night” stock.

Potential Risks

Fortis remains a utility company; in other words, don’t expect astronomical growth. However, Fortis’ current investment plan is enough to make investors smile. Fortis made two acquisitions in the U.S. to perpetuate its growth by opening the door to a growing market. However, it may be difficult for the company to grow to a level where economies of scale would be comparable to that of other U.S. utilities. The risk of paying a high price for other U.S. utilities is also present. Finally, as most of its assets are regulated, each increase is subject to regulatory approval. While FTS has a long history of negotiating with regulators, it’s possible to see rate increase demands being revised. Please also note that Fortis’ revenue is subject to currency fluctuations between the CAD and USD currencies.

Royal Bank of Canada (RY.TO)

Business Outlook

Royal Bank counts on many growth vectors: its insurance, wealth management, and capital markets divisions. These sectors combined now represent over 50% of its revenue. These are also the same segments that helped Royal Bank to stay the course during the pandemic. The company has made significant efforts in diversifying its activities outside of Canada and has a highly diversified revenue stream to offset interest rate headwinds. Canadian banks are protected by federal regulations, but this also limits their growth. Having some operations outside of the country helps RY to reduce risk and improve its growth potential. The bank posted impressive results for the latest quarters driven by strong volume growth and market share gains which offset the impact of low interest rates. As interest rates are expected to rise in 2022, RY is in good position. Royal Bank exhibits a perfect balance between revenue growth.

Royal Bank has traditionally increased its dividend twice per year. Under normal circumstances, an investor can count on two low-single-digit dividend increases each year. The bank paused its dividend growth policy between 2008 and 2010 but returned with double-digit dividend growth increases in 2012. Regulators put a hold on dividend increases for all banks in 2020 and Canadian banks and lifted it in late 2021. Royal Bank went with a generous dividend increase of $0.12/share or 11%. You can expect the bank to go back to a mid-single digit dividend growth rate.

Potential Risks

After the 2018 financial market crash, the bank focused on growing its smaller sectors. While wealth management should continue to post stable income, the insurance and capital markets divisions are more inclined to variable returns. There were concerns with Canadian Banks’ management of their provisions for credit losses as the RBC loan portfolio was affected by the pandemic with higher provisions for credit losses (PCL) in 2020. The good news for investors is that PCL has declined to pre-pandemic levels. While loans and deposits increased, interest rate margins will continue to put pressure on earnings. On the flip side, Royal Bank is highly exposed to the Canadian housing market and higher interest rates may affect this market.

Telus (T.TO)

Business Outlook

Telus has grown its revenues, earnings, and dividend payouts on a very consistent basis. Telus is very strong in the wireless industry and is now attacking other growth vectors such as the internet and television services. The company has the best customer service in the wireless industry as defined by their low churn rate. It uses its core business to cross-sell its wireline services. The company is particularly strong in Western Canada. Telus is well-positioned to surf the 5G technology tailwind. Finally, Telus looks at original (and profitable) ways to diversify its business. Telus Health, Telus Agriculture and Telus International (artificial intelligence) (TIXT.TO) are small, but emerging divisions that should lead to more growth going forward.

This Canadian Aristocrat is by far the industry’s’ best dividend payer. Telus has a high cash payout ratio as it puts more cash into investments and capital expenditures. Capital expenditures are always taking away significant amounts of cash due to their massive investment in broadband infrastructure and network enhancement. Such investments are crucial in this business. Telus fills the cash flow gap with financing for now. At the same time, Telus keeps increasing its dividend twice a year showing strong confidence from management. You can expect a mid-single digit increase year after year.

Potential Risks

As competition increases among the Big 3 and with the arrival of Shaw Communications (SJR.B.TO) in the wireless market, future margins could be under pressure. Plus, the Federal Government would like to see more competition for the “Big 3” and will likely open the doors for new competitors going forward. Telus will eventually have to think about other growth vectors once the wireless market becomes fully mature. TV & internet will not be enough to avoid Telus becoming another Verizon (VZ) in 10 years. Finally, Telus’ debt has increased substantially from $12B in 2015 to $21B in 2022. As interest rates remain low, it is a good strategy to use leverage. However, this situation will not last forever since interest rates are now rising.

I know how hard it is to invest when stocks don’t seem to trade at their fair value

This workbook is a guide to help you achieve three things:

Invest with conviction and address directly your buy/sell questions.

Build and manage your portfolio through difficult times.

Enjoy your retirement.

FREE WORKBOOK

Disclaimer: I hold shares of ATD.B, FTS, T, RY, CNR.

Best Canadian Stocks to buy in 2022

Most of the best Canadian stocks pay a dividend. Canadian dividend stocks are known for their stability when markets are rough, and for the income they provide investors quarterly. Companies operating in sectors such as telecoms, utilities, REITs and banks will protect you against market fluctuations and severe losses.

Not all dividend-paying companies are good investments. However, investing in dividend stocks could also lead to painful losses and income cuts. The risk of buying dividend traps or seeing your retirement income plummet due to the wrong stock selection happens too often.

The market creates bubbles and hurts your portfolio. You worked hard to invest money, and you shouldn’t lose it to the wolfs of Bay Street. There is a way you can invest safely in Canadian dividend stocks.

What are the best Canadian dividend stocks?

When I built my retirement portfolio, I focused on companies showing a combination of safe income and steady growth. Many of my choices are Canadian Dividend Aristocrats (companies showing several years of consecutive dividend increases). I added a few more metrics and used the DSR stock screener to refine my research.

Here are the best Canadian Dividend Stocks for 2022:

#14 Canadian Net REIT

#13 Emera

#12 Canadian National Resources

#11 Canadian National Railway

#10 Enbridge

#9 Granite REIT

#8 Magna International

#7 Algonquin Power

#6 Brookfield Renewable

#5 Royal Bank

#4 Fortis

#3 Telus

#2 Alimentation Couche-Tard

#1 National Bank

How to Buy in Canadian dividend stocks

#14 Canadian Net REIT

This is an interesting small REIT that has flown under the radar. Canadian Net REIT enjoys stable cash flows from its properties under the triple net lease formula (tenants handle insurance, taxes, and maintenance costs). Triple net lease REITs let tenants manage more risk as they handle all expenses involving the property. The REIT has high quality tenants such as Loblaws (25% of NOI), Walmart (11%), Sobeys (10%), Suncor (7%) and Tim Hortons (6%).

The REIT’s portfolio makes this company quite resilient to any kind of recession. We got a good idea of how NET fared during the 2020 lockdowns as its revenue continued to increase. The bulk of its properties are situated in the province of Quebec, with a small number in Ontario and the Maritimes. We should keep in mind that the company trades on the TSX. This small cap (around $150M of market capitalization) is subject to low trading volume and strong price fluctuations. Follow this one quarterly to make sure the situation remains stable.

#13 Emera

Emera is an interesting utility with a solid core business established on both sides of the border. EMA now has $32 billion in assets and will generate annual revenues of about $6 billion. It is well established in Nova Scotia, Florida, and four Caribbean countries. This utility is counting on several green projects consisting of both hydroelectric and solar plants. Between 2022 and 2025, management expects to invest $8.4 to $9.4B in new projects to drive additional growth.

These investments decrease the risk of future regulations affecting its business as the world is slowly making the shift toward greener energy sources. Most of its CAPEX plan (about 70%) will be deployed in Florida, where Emera is already well-established. In general, Florida offers a highly constructive regulatory environment; in other words, EMA shouldn’t have any problems raising rates. This is a “sleep well at night” investment.

#12 Canadian National Resources

However, CNQ is very well positioned to surf any oil booms. The stock price has more than doubled in value since the fall of 2020. It has previously invested very heavily, and it is now generating higher free cash flow because of past capital spending. CNQ exhibited resiliency in 2020, and this merits a star in their book!

#11 Canadian National Railway

CNR has been known for being the “best-in-class” for operating ratios for many years. CNR has continuously worked on improving its margins and was among the first to do so. Today, peers have caught up and all railroads are managed in the same way. CNR also owns unmatched quality railroads assets. It has a very strong economic moat as railways are virtually impossible to replicate so we can therefore count on increasing cash flows each year. Plus, there isn’t any more efficient way to transport commodities than by train.

The good thing about CNR is that an investor can always wait for a down cycle to make an investment. We can often spot a good occasion around the corner since we see railroads as attractive investments. Finally, the cancellation of the Keystone XL pipeline will drive demand for oil transport via railroads and CNR will benefit. Management is being challenged and we should see more growth emerging from this challenging period.

#10 Enbridge

Enbridge has a handful of projects on the table or in development. It must deal with regulators, notably for their Line 3 and Line 5 projects. Both projects are slowly but surely developing. The cancellation of the Keystone XL pipeline (TC Energy) secures more business for ENB for its liquid pipelines. ENB now has a “greener” focus with its investments in renewable energy.

#9 Granite REIT

GRT used to be an extension of Magna International (MG.TO). In 2011, Magna represented about 98% of its revenues. It is now down to 31% as at November 2021 (with Amazon as its second-largest tenant with 5% of revenue). Management has transformed this industrial REIT into a well-diversified business without adversely affecting shareholders. GRT now manages 114 properties across 7 countries. The REIT also boasts an investment grade rating of BBB/BAA2 stable.

With a low FFO payout ratio (around 72%), shareholders can enjoy a 3%+ yield that should grow and match or beat the inflation rate. This is among the rare REITs exhibiting AFFO per unit growth while issuing more units to finance growth.

#8 Magna International

MG is a leader in the auto parts industry, and this serves it well since many manufacturers tend to concentrate their processes with fewer suppliers that offer wider product ranges. This is exactly where Magna stands in the market. The company could literally design, develop and build a complete car on its own. While MG relies on Detroit automakers for about 40% of its sales, the overall automobile business is looking brighter.

Magna has also concluded several partnerships with European manufacturers and is involved with many electric vehicle manufacturers. Finally, there is a high switching cost for automakers to change between suppliers like Magna, making its niche a highly repetitive and stable market.

#7 Algonquin Power

Like many utilities in North America, solid growth is to be found outside of the company. AQN had approximately 120K customers in 2013 and now serves over 1M customers and achieved this impressive growth through acquisitions. The company “did it again” with the recent acquisition of Kentucky Power; the transaction is expected to close in Q2 2022 and should add another 165K customers. With a budget of $12.4B in CAPEX, AQN has several projects pending through to 2026. These include more acquisitions, pipeline replacements and organic CAPEX.

The utility counts on its regulated businesses to grow its revenue once those projects are funded. AQN has double-digit earnings growth potential for the foreseeable future but expect a short-term slowdown due to an aggressive leverage strategy and more common shares being issued.

#6 Brookfield Renewable

The future of energy will be found across hydroelectric, solar, and wind power. Approximately 50% of BEP’s portfolio is focused on hydroelectric power. New money is going toward solar and wind projects. The company has power plants across North America, South America, Europe, and Asia. BEP enjoys large scale capital resources and the expertise to manage its projects across the world. Management aims for a 5-9% annual distribution increase. This promise is backed by double-digit guidance that includes a mix of organic and M&A growth.

Investors are gravitating toward clean energy and BEP is well-positioned to attract them. BEP now offers shares under both a REIT and a regular corporate structure. From what we have seen on the market, the C class (BEPC) tends to attract more investors, meaning a stronger price.

#5 Royal Bank

The bank posted impressive results for the latest quarters driven by strong volume growth and market share gains which offset the impact of low interest rates. As interest rates are expected to rise in 2022, RY is in good position. Royal Bank exhibits a perfect balance between revenue growth.

#4 Fortis

Only 33% of its CAPEX plan will be financed through debt, while 61% will come from cash from operations. Chances are that most of its acquisitions will happen in the US. We also like the company’s goal of increasing its exposure to renewable energy from 2% of its assets in 2019 to 7% in 2035. The yield isn’t impressive at 3.30%, but there is a price to pay for such a high-quality dividend grower.

#3 Telus

Telus is well-positioned to surf the 5G technology tailwind. Finally, Telus looks at original (and profitable) ways to diversify its business. Telus Health, Telus Agriculture and Telus International (artificial intelligence) (TIXT.TO) are small, but emerging divisions that should lead to more growth going forward.

#2 Alimentation Couche-Tard

ATD exhibits a solid combination of the dividend triangle: revenue, EPS, and strong dividend growth. The company counts on multiple organic growth vectors such as Fresh Food Fast, pricing & promotion, assortment, cost optimization and network development.

#1 National Bank

National Bank has been more flexible and proactive in many growth areas such as capital markets and wealth management. Currently, NA is seeking additional growth vectors by investing in emerging markets such as Cambodia (ABA bank) and in the U.S. through Credigy. We wonder if it can it have more success than BNS on international grounds. It seems like they may have found the right formula to do so! This is one of the rare Canadian stocks having a near-perfect dividend triangle.

How to Buy in Canadian dividend stocks

Since the beginning of the year, most investors lost money. The past 6 months have been quite frustrating for investors and predicting the outcome of this crisis seems impossible. You don’t want to lose more money and you are afraid your retirement dream is slipping away.

No investors should have to roll the dice for their retirement.

First, know that I’m invested 100% in equities all the time. I have been since I first bought my first shares (it was Power Corporation POW.TO) back in 2003. I did not change my approach in 2008, 2018 or 2020 and I certainly won’t today.

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Our PRO ratings have been proven highly efficient during the bear market of 2018 and the market crash of 2020.

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#2 Identify weak ratings, take action before it’s too late. Difficult economic conditions will push companies to cut their dividend. The next round of dividend cuts hasn’t stared yet. This means it’s your chance to avoid a loss of income and capital.

Make changes to your portfolio and run your report again! You can run another report 24 hours after you updated your portfolio!

#3 Add stocks that will thrive going forward. At DSR, we scout the entire market to find companies that have a proven business model and that will keep increasing their distributions. With the DSR screener you can instantly filter on DSR favourite stocks or those with PRO ratings of 4 or 5. However, did you know that as a PRO member, you will also be able to save your filter views and create as many reaches as you want?

We offer more than 40 metrics including an ESG score, valuation and credit score on top of the Chowder rule and the 5-year average dividend yield.

#4 Talk about dividend stocks with other DSR PRO members! We created an exclusive channel on Discord for DSR PRO members. The forum has rapidly grown into a community of 700+ experienced investors sharing their point of view on stocks, strategies and helping each other. You are not alone in your journey, let’s share your thoughts with other investors like you!

How to subscribe to DSR PRO with a 33% lifetime discount

I’m excited for you to get your DSR PRO report, take appropriate actions and secure your portfolio. Making sure you keep only good companies in your portfolio is crucial during volatile markets.

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