As the Composite S & P / TSX index continues to drive higher, Canadian income stock returns are falling. With interest rates this low, it’s no surprise that income-oriented investors are turning to dividend stocks. So-called high-interest savings accounts bring investors a negative real return after inflation. Likewise, long-term bonds are not a good choice if there is a chance interest rates will rise from here.
The point is, Canadian dividend stocks aren’t such a bad way of meeting your income needs. Right now, cyclical and value stocks look attractive because they can actually benefit from inflation. With that in mind, here are four Canadian stocks that currently pay a dividend of 4% or more.
A leading Canadian pipeline stock
Pembina pipeline (TSX: PPL) (NYSE: PBA) has taken many big strides lately. It only brought its name into play a few days ago to acquire the controversial Trans Mountain Pipeline with a syndicate of indigenous groups. A few weeks ago there was also a friendly offer to acquire a competing midstream / pipeline player Inter-pipeline.
This merger looks pretty attractive. The two companies have very complementary assets and there are many opportunities for synergy. Certainly, Brookfield Infrastructure is still in the mix with a higher offer to buy the IPL assets, so it’s not a firm deal yet.
However, should Pembina win, it would get IPL at a pretty attractive price. Pembina management has already promised a 5% dividend increase upon closing of the deal. Regardless, this is a great business with extremely stable cash flows. Today it pays a dividend of 6.4% so you’ll be well compensated when the acquisition growth plans are put in place.
A leading energy producer
Canadian natural resources (TSX: CNQ) (NYSE: CNQ) is a very attractive Canadian energy stock. If you can endure a little commodity-related volatility, you can get a nice dividend of 4% and lots of upside potential if energy prices keep rising. CNQ is one of the largest producers of natural gas and oil in Canada. It has produced energy products with factory-like efficiency.
Today oil can be produced there for less than US $ 20 a barrel. With oil prices exceeding $ 70, it generates a tremendous amount of free cash flow! Despite the pandemic, it’s an oil producer that has never cut its dividend. It wasn’t until March 2021 that it increased its quarterly dividend by 10%. Add in deleveraging and share buybacks and this stock could deliver very high total returns over the next year.
A REIT anchored in the grocery store
If you like stable, bond-like income, then Choice Properties Real Estate Investment Trust (TSX: CHP.UN) is a good name. This Canadian stock operates a mix of office, industrial and retail properties, largely divided by various Loblaw Subsidiaries. Its properties are vital and mostly rented out by grocery stores, so I’m not too concerned about the “Amazon Impact ”on their retail operations.
This REIT pays a well-covered dividend of 5%. The REIT has very long contract terms (an average of 6.5 years) and high-quality rental agreements. It also has $ 380 million development projects in the pipeline, so I believe these could fuel cash flow growth over the next few years.
A Canadian real estate stock expanding in Europe
Industrial dream REIT (TSX: DIR.UN) could be my favorite REIT for both ROI and ROI. It operates multi-tenant industrial real estate in Canada, the US and Europe. These are well-located properties for distribution, warehousing and e-commerce logistics. It benefits from a very high occupancy rate, rising rental prices and high demand for its properties.
It recently won an auction to buy a large portfolio of assets in Europe. As a result, 37% of the portfolio will be located there. E-commerce has a lot of room for expansion in Europe. As a result, rental growth in this region could soon outpace that in North America. This Canadian stock pays a dividend of 4.85%, but given the favorable environment for industrial real estate, I believe this stock will also deliver strong capital appreciation.
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This article represents the opinion of the author who may disagree with the “official” endorsement position of a premium service or advisor to the Motley Fool. We are Motley! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer. As a result, we sometimes publish articles that may not match recommendations, rankings, or other content.
Fool Robin Brown owns stocks in Pembina Pipeline Corporation, Brookfield Infrastructure Partners, Amazon.com and Dream Industrial REIT. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends BROOKFIELD INFRA PARTNERS LP UNITS, Brookfield Infrastructure Partners, DREAM INDUSTRIAL REIT, and PEMBINA PIPELINE CORPORATION and recommends the following options: long January 2022 $ 1,920 calls on Amazon and short January 2022 $ 1,940 calls on Amazon.
