10 Canadian Dividend Stocks to Buy for 2022

Published on December 20, 2021 at 9:04 am by Vardah Gill in Hedge Funds, News

In this article, we discuss the best Canadian dividend stocks to buy for 2022.

Canadian stock market suffered heavily in the face of the pandemic as the S&P/TSX Composite Index fell by 37% between February and March 2020. However, the financial market is back on solid footing as the economy reopens. In October, Canadian stocks saw their longest streak of gains, as S&P/TSX Composite surged for a 14th straight session, surpassing the U.S. benchmark and adding $191 billion of value, as reported by Bloomberg.

Though the S&P/TSX Composite’s average annual return of 5.99% over the last 10 years lagged behind its counterpart S&P 500’s return of 17.1% during the same time, analysts noted that the difference is becoming thinner as investors have started to pay attention to Canadian stocks.

Moreover, in a recent development, the country’s financial regulators have permitted the banks to boost dividends, after lifting restrictions it imposed in March 2020 due to the pandemic. According to Bloomberg, the banks could raise dividends by as much as 25%, as they have saved a record amount of capital during the pandemic.

Historically, dividend stocks in Canada have generated better returns compared with non-dividend stocks. As reported by Highview Financial Group, S&P/TSX High Dividend Composite, an index focused on dividend income, returned 10.9% in the past 21 years, compared with a 6.8% return of Canada’s benchmark index during the same period.

While American dividend stocks like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), General Mills, Inc. (NYSE:GIS), and Johnson & Johnson (NYSE:JNJ) keep garnering all the attention, in this article, our focus would be on Canadian dividend stocks.

Photo by Artem Beliaikin on Unsplash

Our Methodology:

The stocks mentioned below are the Canadian companies that pay dividends. We considered dividend yields, analysts’ ratings, and basic fundamentals while picking these stocks.

10. The Toronto-Dominion Bank (NYSE:TD)

Number of Hedge Fund Holders: 17

Dividend Yield: 3.36%

The Toronto-Dominion Bank (NYSE:TD) is a Canada-based multinational banking and financial services company, founded in 1855. Recently, Wall Street analysts presented a positive outlook on the bank, as both Canaccord and National Bank raised their price targets on The Toronto-Dominion Bank (NYSE:TD) to C$102 and C$106, respectively.

The Toronto-Dominion Bank (NYSE:TD) is one of the best Canadian dividend stocks to buy as it holds a remarkable 164-year track record of consistent dividend payments. Moreover, the company has grown its dividend at a CAGR of 11% since 1995. In its fiscal Q4 results, The Toronto-Dominion Bank (NYSE:TD) posted an EPS of C$2.09, beating estimates by C$0.14. As of the close of December 14, the stock is up 30.9% year-to-date.

The number of hedge funds tracked by Insider Monkey holding stakes in The Toronto-Dominion Bank (NYSE:TD) stood at 17 in Q3, the same as in the preceding quarter. The value of these stakes is $294.3 million.

Like prominent stocks such as The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), General Mills, Inc. (NYSE:GIS), and Johnson & Johnson (NYSE:JNJ), The Toronto-Dominion Bank (NYSE:TD) is also gaining ground among income investors.

9. Royal Bank of Canada (NYSE:RY)

Number of Hedge Fund Holders: 16

Dividend Yield: 3.40%

Royal Bank of Canada (NYSE:RY) is a multinational financial services company and also the largest bank in Canada. The company has been paying dividends for 32 years, increasing its yield at an average of 5.62% annually over the past ten years. This makes Royal Bank a reliable dividend stock, just like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG) and Johnson & Johnson (NYSE:JNJ).

At the end of Q3, 16 hedge funds tracked by Insider Monkey held positions in the Royal Bank of Canada (NYSE:RY), down from 18 in the previous quarter. These stakes hold a consolidated value of over $1.1 billion, up from $905.4 million in Q2.

In fiscal Q4 2021, Royal Bank of Canada (NYSE:RY) reported revenue of C$12.38 billion, presenting an 11.6% growth from the prior-year quarter. Recently, Canaccord set a C$141 price target on Royal Bank of Canada (NYSE:RY), while maintaining a Buy rating on the shares. GQG Partners was the company’s largest shareholder, holding over 8.6 million shares.

Gator Capital Management mentioned Royal Bank of Canada (NYSE:RY) in its Q1 2021 investor letter. Here is what the firm has to say:

“We own a position in Royal Bank of Canada (“RBC”) and are completing our due diligence on several other Canadian banks. Royal Bank is the #1 bank in Canada. It has a business mix similar to JP Morgan Chase (“JPM”) with strong retail and corporate banking businesses. It also has a significant investment banking and asset management business. From here, we believe Canadian bank stocks will generate attractive returns for shareholders in the medium and long term.

Here is more detail on our investment thesis for Royal Bank of Canada:

Bank with consistently high returns– RBC consistently posts Return on Tangible Common Equity (“ROTCE”) in the low 20%. In contrast, JPM has reported ROTCE between 12% and 19% over the last six years. We think this reflects the higher margins of the Canadian banking system.

Leading bank in Canada– RBC is the leading bank in Canada. It has the highest returns, the highest market share, and the highest valuation of the five major Canadian banks. We believe other stock market investors will favor RBC when Canadian banks regain favor.

Low relative valuation to US Banks– Canadian banks have had … [read the complete letter here]

8. Canadian Imperial Bank of Commerce (NYSE:CM)

Number of Hedge Fund Holders: 13

Dividend Yield: 4.18%

Canadian Imperial Bank of Commerce (NYSE:CM), a banking and financial services company, recently announced the use of Visa direct payouts to enable cross-border transactions as part of its Global Money Transfer Service. Since the start of 2021, the stock surged 31.2%, while its 12-month returns stood at 27.7%, as of the close of December 14.

On December 2, Canadian Imperial Bank of Commerce (NYSE:CM) announced a 10% increase in its dividend at C$1.61, with a dividend yield of 4.18%. The company’s 3-year dividend growth stands at 8.43%. In fiscal Q4 earnings, Canadian Imperial Bank of Commerce (NYSE:CM) earned C$5.06 billion in revenue, up 10% from the same period a year ago. Recently, National Bank set a C$165 price target on Canadian Imperial Bank of Commerce (NYSE:CM), while maintaining an Outperform rating on the shares.

As per Q3’s data of Insider Monkey, 13 hedge funds held stakes in Canadian Imperial Bank of Commerce (NYSE:CM), valued at $289.7 million. In comparison, 15 hedge funds were bullish on the stock in the previous quarter, holding shares worth $382.8 million. Among the smart money, D E Shaw was the company’s biggest shareholder in Q3, owning a $78.8 million stake.

7. The Bank of Nova Scotia (NYSE:BNS)

Number of Hedge Fund Holders: 17

Dividend Yield: 4.6%

The Bank of Nova Scotia (NYSE:BNS) is a multinational banking and financial services company. Currently, the company pays an annual dividend of $2.83 per share, with a dividend yield of 4.6%. According to analysts, the attractive yield mainly stems from a higher payout ratio of 46.83%.

The number of hedge funds tracked by Insider Monkey having stakes in The Bank of Nova Scotia (NYSE:BNS) increased to 17 in Q3, from 14 in the previous quarter. These stakes hold a consolidated value of $193.3 million.

Recently, TD Securities raised its price target on The Bank of Nova Scotia (NYSE:BNS) to C$95, while maintaining a Buy rating on the shares. As of the close of December 14, the stock surged 26.6% year-to-date. The fiscal Q4 earnings report of The Bank of Nova Scotia (NYSE:BNS) revealed an EPS of C$2.10, which beat the estimates by C$0.20. The earnings beat was driven by strong growth in its international banking.

6. TELUS Corporation (NYSE:TU)

Number of Hedge Fund Holders: 12

Dividend Yield: 4.46%

TELUS Corporation (NYSE:TU) is one of the largest telecommunications companies in Canada that provides multiple services related to the internet, entertainment, healthcare, and communications.

On November 5, TELUS Corporation (NYSE:TU) announced a 3.5% increase in its dividend at C$0.3274. The stock’s current dividend yield stands at 4.46%. The company has been increasing its dividend for the past year, which will likely continue in the coming years as well, according to analysts. In Q3 earnings, TELUS Corporation (NYSE:TU) posted an EPS of $0.29, which beat estimates by $0.01. Also, the company’s revenue for the quarter experienced a 6.8% year-over-year growth at $4.25 billion.

This November, CIBC lifted its price target on TELUS Corporation (NYSE:TU) to C$31, while keeping an Outperform rating on the shares.

At the end of Q3 2021, 12 hedge funds in Insider Monkey’s database were bullish on TELUS Corporation (NYSE:TU), compared with 13 in the previous quarter. These stakes hold a consolidated value of $141.2 million, growing significantly from $215.2 million in the preceding quarter. Jim Simons’ hedge fund, Renaissance Technologies, was the leading shareholder of TELUS Corporation (NYSE:TU) in Q3, owning over 3.3 million shares.

In addition to TELUS Corporation (NYSE:TU), investors are piling into other reliable dividend stocks like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), General Mills, Inc. (NYSE:GIS), and Johnson & Johnson (NYSE:JNJ).

5. Canadian Natural Resources Limited (NYSE:CNQ)

Number of Hedge Fund Holders: 27
Dividend Yield: 4.65%

A Canadian oil and natural gas company, Canadian Natural Resources Limited (NYSE:CNQ) recently landed in hot water as oil prices in Canada declined by 20%. However, expecting the recovery in prices soon, recently, Morgan Stanley initiated its coverage on Canadian Natural Resources Limited (NYSE:CNQ) with an Equal Weight rating and a C$53 price target.

In Q3 2021, 27 hedge funds in Insider Monkey’s database reported owning stakes in Canadian Natural Resources Limited (NYSE:CNQ), the same as in the previous quarter. However, the total value of these stakes grew to roughly $957 million in Q3, from $777.1 million in the preceding quarter.

On November 4, Canadian Natural Resources Limited (NYSE:CNQ) increased its quarterly dividend significantly by 25% at C$0.5875 per share. With a dividend yield of 4.65%, the company remains one of the best Canadian dividend stocks to buy. Since the start of 2021, Canadian Natural Resources Limited (NYSE:CNQ) delivered a 61.66% return to shareholders, as of the close of December 14.

4. BCE Inc. (NYSE:BCE)

Number of Hedge Fund Holders: 15
Dividend Yield: 5.52%

BCE Inc. (NYSE:BCE) is a Canadian communications company that provides media and internet services to its consumers. In Q3, the number of hedge funds having stakes in the company grew to 15, from 14 in the previous quarter. These stakes hold a consolidated value of $129.1 million, up from $113.2 million.

BCE Inc. (NYSE:BCE) pays an annual dividend of $2.77 per share. The stock’s current dividend yield stands at 5.52%. In Q3, the company reported solid results, earning C$5.84 billion in revenue, beating estimates by C$100 million. Moreover, BCE Inc. (NYSE:BCE)’s IPTV net subscriber activations grew by 10.2%.

This November, Scotiabank raised its price target on BCE Inc. (NYSE:BCE) to C$68, while maintaining an Outperform rating on the shares. In 2021, the stock surged 16.7%, as of the close of December 14.

3. TC Energy Corporation (NYSE:TRP)

Dividend Yield: 15
Dividend Yield: 5.98%

TC Energy Corporation (NYSE:TRP) is a Canadian energy company that also deals in natural gas and liquid pipelines. The company remains one of the best Canadian dividend stocks to buy, as, over the five years, it has increased its dividend at a CAGR of 10%. Currently, TC Energy Corporation (NYSE:TRP) pays a quarterly dividend of $0.87 per share, with a dividend yield of 5.98%.

In Q3, TC Energy Corporation (NYSE:TRP) posted an EPS of C$0.99, in line with the estimates. Moreover, the company also announced $1 billion in comparable earnings, up significantly from $79 million from the same period last year. Recently, TD Securities set a C$72 price target on TC Energy Corporation (NYSE:TRP), while maintaining a Buy rating on the shares.

At the end of Q3, the number of hedge funds having stakes in TC Energy Corporation (NYSE:TRP) decreased to 15, from 22 in the previous quarter. The value of these stakes is over $84 million. Heathbridge Capital Management was one of the company’s largest shareholders, holding a stake worth $31.3 million.

2. Pembina Pipeline Corporation (NYSE:PBA)

Number of Hedge Fund Holders: 8
Dividend Yield: 6.95%

Pembina Pipeline Corporation (NYSE:PBA) is a Canadian pipeline transport company that also deals in the natural gas processing business. The company reported solid Q3 results, mainly driven by higher crude oil sales. Pembina Pipeline Corporation (NYSE:PBA) posted a GAAP EPS of C$1.01, beating estimates by C$0.32. Moreover, the revenue of C$2.15 billion, also presented a 43.3% growth from the prior-year quarter.

At the end of Q3 2021, 8 hedge funds reported owning stakes in Pembina Pipeline Corporation (NYSE:PBA), down from 15 in the previous quarter. These stakes hold a total value of over $62.6 million. As of the close of December 14, the stock’s year-to-date returns stood at 21.9%.

Pembina Pipeline Corporation (NYSE:PBA)’s five-year dividend growth rate is 7.15% and the company has been paying dividends consistently since 1998, which places it as one of the best Canadian dividend stocks to buy. Recently, JPMorgan initiated its coverage on Pembina Pipeline Corporation (NYSE:PBA) with a Neutral rating and a C$45 price target.

1. Enbridge Inc. (NYSE:ENB)

Number of Hedge Fund Holders: 24
Dividend Yield: 7.14%

At the end of Q3, the hedge fund interest increased in Enbridge Inc. (NYSE:ENB), a Canadian natural gas distribution company. Of the hedge funds tracked by Insider Monkey, 24 hedge funds held stakes in the company in Q3, up from 19 in the previous quarter. These stakes hold a consolidated value of $211.4 million, compared with $166 million in Q2.

Enbridge Inc. (NYSE:ENB)’s dividend has grown at a CAGR of 13.57% over the past ten years. The company recently announced a 3% growth in its quarterly dividend at C$0.860 per share, making it one of the best Canadian dividend stocks to buy. In Q3, Enbridge Inc. (NYSE:ENB) posted an EPS of C$0.59, beating estimates by C$0.03. As of the close of December 14, the stock is up 16.17% year-to-date.

Recently, National Bank lifted its price target on Enbridge Inc. (NYSE:ENB) to C$54, while maintaining an Outperform rating on the shares.

ClearBridge Investments mentioned Enbridge Inc. (NYSE:ENB) in its Q2 2021 investor letter. Here is what the firm has to say:

“On a regional basis, the U.S. and Canada was the top contributor to quarterly performance, of which Canadian energy infrastructure company Enbridge was one of the lead performers. Enbridge owns and operates one of the largest oil and gas pipeline networks in North America. The company also owns regulated gas distribution utilities in Ontario, Canada. Enbridge’s Line 3 Replacement Project received a favorable court ruling regarding the adequacy of its Environmental Impact Statement. This significantly lowers the execution risk for the project and enables the company to place the project into service later in the year.”

You can also take a look at 10 Canadian Dividend Stocks with Over 3% Yield and 10 Best Canadian Gold Stocks To Buy Right Now

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