Top 10 Canadian Dividend Stocks – September 2020

While we know that the stock market will grow over time, on a day-to-day or even month-to-month basis, the stock market is always changing value due to the daily fluctuation of all the stocks.

The opportunities will vary every month and that’s why it’s important to have a systematic approach to understanding which dividend stocks are an opportunity. An opportunity can be for a stock you already own or simply for a new addition to your portfolio. It is important to note that the rankings below do not assess the viability of the business. Some of the companies are strong blue chip stocks while others are smaller companies with growth or just simply beaten down.

Top 10 Canadian Dividend Stocks

Here are the top 10 Canadian dividend stocks for this month, see below for the details. This is obviously a snapshot in time at the time of writing, many factors could change the rankings.

Here is a quick excerpt on the top 10 dividend growth stocks opportunities identified through the Canadian Dividend Stock Screener.

Stay on top of your next investment decision with the Dividend Snapshot Canadian Dividend Screener. Review the Chowder Rule along with the 3, 5, and 10 year ratios for dividend growth, EPS growth and the payout ratio to pick a solid investment for your portfolio.

The monthly top 10 rarely have the same top 10 stocks. Be sure to come back, or better yet, follow the top 10 with the Canadian Dividend Screener.

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#1 – Algonquin Power & Utilities Corp

AQN - Algoquin Power & Utilities CorpAlgonquin Power & Utilities is a diversified utility company in North America with $10 billion in total assets. The company engages in the generation, transmission, and distribution of water, gas, and electricity to communities across the U.S. It also has renewable energy business. As a growing renewable energy company, Algonquin Power owns a strong portfolio of long term contracted wind, solar and hydroelectric assets with 1.5 GW of total installed capacity. The company through its subsidiaries owns an equity interest in more than 39 clean energy facilities. Algonquin Power operates through two subsidiaries: Liberty Utilities (64% of 2018 earnings) and Liberty Power (36%). The company has more than 50 power generation facilities and 20 utilities across North America. Algonquin’s utility business serves nearly 770,000 customers in twelve states across the U.S., through 1,200 miles of electrical transmission lines and 100 miles of natural gas transmission pipelines.

Investment Data

#2 – TC Energy

TRP - TransCanada PipelineTC Energy is a leading North American infrastructure company. It supplies more than 25% of natural gas consumed daily across North America. The company has a strong portfolio of diversified assets, storage facilities and power generation plants and operates one of North America’s largest natural gas pipelines networks extending to more than 57,500 miles. TC Energy operates three complementary energy infrastructure businesses across three major geographies in North America. By generation type, TC’s assets can be divided into nuclear, natural gas and wind. The USA, Canada and Mexico are its core geographies and the company has access to North America’s two most prolific natural gas supply basins. With more than 65 years of service, TC Energy is known for delivering energy in a safe and sustainable manner. Ownership of low-risk regulated cost-of-service businesses and long-term contracted energy infrastructure assets differentiate TC Energy from its peers.

Investment Data

#3 – Scotia Bank

BNS - SmallScotiabank is a leading international bank in Canada and a leading financial services provider in the Americas. The bank has a presence in personal and commercial, corporate and investment banking, wealth management and capital markets, and serves 25 million customers worldwide. With a rich history of 185 years, the bank has developed an extensive network of over 960 branches and more than 3,600 automated banking machines in Canada, and 1,800 international branches. Scotiabank has a wide geographic presence in attractive markets in Latin America (71% of revenues), Caribbean & Central America (25%) and Asia (4%). It operates through Canadian banking (49% of earnings), international banking (36%) and global banking and markets (15%) business lines. Scotiabank is highly diversified by products, customers and geographies, which reduces risk and volatility. The bank generates nearly 80% of its earnings from high quality and stable businesses which gives stability to cash flows.

Investment Data

#4 – Emera

EMA - EmeraEmera Inc. is a leading North American diversified energy and services company with assets worth $30 billion. The company engages in the generation, transmission, and distribution of electricity and gas, and provides other utility energy services. Emera Inc. has operations in Canada, the USA and in four Caribbean countries. The company serves a diverse base of residential, commercial as well as industrial customers. It operates a balanced and diversified portfolio consisting of ~90% regulated assets in electric utilities, gas LDCs; and unregulated gas-fired generation across North America. Emera reports its results in six operating segments: Emera Florida and New Mexico, Nova Scotia Power Inc., Emera Maine, Emera Caribbean, Emera Energy, and corporate & other. The company invests in electricity generation, transmission and distribution, gas transmission and distribution, and utility energy services. It also has investments in renewable energy assets.

Investment Data

#5 – Canadian Utilities

CU - SmallCanadian Utilities is one of the largest utility companies in Canada. It is a subsidiary of ATCO. By geography, Canada is its principal place of business accounting for 94% of revenues, followed by Australia (5%) and other countries (1%). The company owns regulated electric and gas distribution and transmission assets worth $22 billion serving more than two million customers around the world. About 86% of Canadian Utilities’ earnings comes from regulated sources, and the remaining 14% is derived from long-term contracted assets. Canadian Utilities has core investments in electricity, pipelines & liquids and retail energy business units, as well as its international operations in Australia and Latin America. Its segments are Electricity (70% of 2018 earnings), Pipelines & Liquids (40%) and Corporate & other (-10%). The company owns an extensive network consisting of 87,000 km electrical powerlines, 64,500 km pipelines, 21 global generating plants, water infrastructure capacity of 85,200 cubic meters per day, and natural gas and hydrocarbon storage capacities.

Investment Data

#6 – Pembina Pipeline

PPL - Pembina PipelinePembina Pipeline is a leading midstream and transportation service provider in North America. The company is known for providing safe and cost-effective transportation solutions since the last six decades. The company offers a wide range of midstream and marketing services to the energy sector. It owns an extensive network of pipelines that transport crude oil, natural gas and natural gas liquids produced primarily in western Canada. It also runs gathering and processing facilities and an oil and natural gas liquids infrastructure business.

Pembina owns a large asset base consisting of pipelines and facilities, which is difficult for newcomers to replicate. As a leading energy infrastructure company, Pembina serves multiple basins and markets throughout Canada and the US. The company has 19 gas processing facilities and 6 billion cubic feet per day of net gas processing capacity. Pembina owns and operates an 18,000 km pipelines with a total capacity of 3 million barrels of oil equivalent per day.

Investment Data

#7 – Alimentation Couche-Tard Inc.

Alimentation Couche-Tard is one of the largest Canadian companies and the owner of several Canadian convenience stores. The company also supplies road transportation fuel to approximately 1,300 locations in the U.S. and offers stationary energy and aviation fuel. Couche-Tard caters to more than 9 million global customers daily, offering them merchandise and services (55% of 2018 revenues), motor fuel (43%) and other (2%). As a leading independent convenience store operator, Couche-Tard owns a network of nearly 10,000 convenience stores in 48 states in the U.S., ten provinces in Canada, as well as other countries. It operates more than 16,000 stores worldwide. By geography, the US is its largest market accounting for 67% of 2018 revenues, followed by Europe (20%) and Canada (13%). The company operates through Couche-Tard and Mac’s brands in Canada and Circle K globally. With nearly four decades of experience, Couche-Tard has adapted to the changing customer habits and preferences and has a sound track record of successful acquisitions over the last decade.

TSE:atd.b

#8 – Enbridge

ENB - EnbridgeEnbridge Inc. is the largest energy infrastructure company in North America. It is Canada’s largest natural gas distributor engaging in the collection, transportation, processing and storage of oil and gas. Enbridge caters to 3.7 million customers in Ontario, Quebec, New Brunswick, and New York. It owns an extensive network of about 192,000 miles of natural gas and NGL pipelines across North America and the Gulf of Mexico. Its crude oil and liquids transportation systems are huge comprising of more than 17,000 miles of active pipelines. The company is known for its high quality liquids and natural gas infrastructure assets. In addition, Enbridge has 3.1 Bcf/d of processing capacity and 438 Bcf of net natural gas storage capacity. It also owns interests in nearly 3,000 MW of renewable generation capacity. Enbridge operates through five reporting segments - Liquids Pipelines (52% of 2018 earnings), Gas transmission and midstream (22%), Gas Distribution (17%), Green Power and Transmission (4%), and Energy Services (5%).

Investment Data

#9 – Genworth MI Canada Inc.

MIC - GenworthGenworth is the largest private residential mortgage insurer in Canada providing mortgage default insurance to Canadian residential mortgage lenders. The company offers both transactional and portfolio mortgage insurance. Genworth is known for delivering value at every stage of the mortgage process. The company operates through its subsidiary, Genworth Financial Mortgage Insurance Company Canada (Genworth Canada). With more than two decades of experience, Genworth has developed deep relations with lenders, brokers, realtors, etc. and has built a broad underwriting and distribution platform across Canada. Genworth provides tailored mortgage insurance products which help customers buy homes with a minimum 5% down payment. The company has helped more than 1.5 million families buy their own homes. Genworth has a strong capital position with a track record of annual dividend increases and share buybacks. Superior customer service, a robust risk management framework and innovative processing technology form a deep moat around Genworth’s business.

Investment Data

#10 – Cogeco

CGO - Cogeco

Cogeco Inc. is a leading telecommunication and media company based in North America. The company provides cable TV, telephone, and Internet to customers in Ontario, Quebec, and some parts of the US.

The company operates through two subsidiaries - Cogeco Communications (cable, broadband services) and Cogeco Media (radio) and  reports its results through two operating segments: Communications (95% of 2017 revenues) and Other (5%). By geography, Canada accounts for 76% of the company’s revenues while the US constitutes the balance 24%.

Cogeco owns an extensive and advanced network of communication infrastructure consisting of long distance fibre optic systems, advanced hybrid fibre-coaxial broadband distribution networks, point-to-point fibre networks and fibre-to-the-home network technologies. It also owns and operates 13 radio stations across Quebec. Cogeco has been in business since the last six decades and is known for its diversified range of telecommunications and media products and services.

Investment Data
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Opportunity Score Formula

The top 10 stocks identified above are based on a score calculated using a number of financial data points from the companies. In the end, the score is generated from following five key indicators:

  • 52-Week Range: Trend over the past 52 weeks. Is the stock pulling back from a 52 week high?
  • P/E Ratio: Is the stock price running away from its earnings?
  • Revenue Growth: Is the revenue growing? Growing revenue is important. We don't want to be fooled by share buybacks and cost management only.
  • Dividend Yield: Is the yield attractive? Usually could identify a pullback if the yield starts to go up or major trouble if it goes too high.
  • Dividend Growth: Uses dividend growth and the Chowder Rule. Is the company capable of growing the dividend consistently?
  • Dividend Payout Ratio: Uses historical averages to put today's ratio in perspective. Is the company able to grow the dividend at the same rate it increases its earnings?

The generated score is meant to assess an entry point opportunity based on historical and today's numbers. It completely ignores the business quality, the quality of the company is for every investor to assess. My stock selection process breaks down the quantitative and qualitative assessments investors should establish to pull the trigger before buying.

If you are interested in more details, the Canadian Dividend Screener provides many more data points to help make your investment decision.

Dividend growth investing works and you can generate a healthy retirement income but you have to buy individual stocks. If you are not comfortable with holding individual stocks, you can always buy dividend ETFs or consider different passive income ideas to generate a retirement income.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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