Dividend stocks are an important part of a well-diversified Canadian stock portfolio though that perspective was lost back in the 1980s and 1990s. With dividend stocks again in favor investors are creating more balanced portfolios. But different analysts have different picks for top Canadian dividend stocks because they have different approaches to screening stocks. Yet here are the results of top Canadian dividend stock picks from three different analysts with unique approaches that came up with related picks.
Dividend stocks back in favor
Older investors will recall the growth stock mania of the 1980s and 1990s. Dividend stocks fell out of favor for the skyrocketing maneuvers of growth stocks including the mania for Internet stocks. These days dividend-paying stocks are back in favor as part of a well-balanced portfolio. One of the factors affecting this move was a trend towards lower yields on bonds versus solid performance from dividend stocks.
But a good choice for Canadian dividend stocks depends on how you look at it. At the end of the day one is seeking high dividends from value companies but sometimes such companies underinvest in their own development and their growth suffers. In addition, though one may be diversifying one’s portfolio with a mix of dividend stocks and other investments, it is difficult to create a diverse assortment of dividend stocks because they tend to cluster in specific industry sectors. So the indicators and reasoning behind top Canadian dividend stock picks are worth considering along with the specific stocks.
Opportunity score formula
The Opportunity Score Formula was used by Dividend Earner to pick their monthly Top 10 Canadian Dividend Stocks. They base the score on five indicators:
– 52-Week Range.
– P/E Ratio.
– Dividend Yield.
– Dividend Growth.
– Dividend Payout Ratio.
This approach is summarized by an Opportunity Score which indicates these three top stocks from their list:
– TransCanada, Opportunity Score 97%.
– Transcontinental Inc, Opportunity Score 95%.
– Cogeco Communication, Opportunity Score 94%.
Canadian dividend aristocrats
Another analyst took the concept of Dividend Aristocrats from the U.S. stock market and applied them to Canadian dividend stocks. Dividend Aristocrats of Canada have three qualifications:
– Toronto Stock Exchange listing.
– Increased payout over five years.
– Minimum C$300 market cap.
The Dividend Aristocrat approach led to a healthy list of 25 Canadian dividend stocks in alphabetical order including:
– Fortis, 44 Consecutive Annual Dividend Increases.
– Thomson Reuters, 24 Consecutive Annual Dividend Increases.
– TransCanada, 18 Consecutive Annual Dividend Increases.
Dividend growth stocks
Our third analyst used the TMX Money Screener to pick an extensive list of Canadian dividend stocks across sectors with the caveat that it is difficult to be well-diversified across Canadian sectors with dividend stocks.
The final list resulted in “37 Canadian dividend growth stocks with a 10-year dividend streak or higher” and a $100 million plus market cap. And interestingly enough all of the above 5 stocks, since TransCanada shows up twice, appear on this long list of Canadian dividend growth stocks.
Picking Canadian dividend stocks
So while it is true that different approaches to picking dividend stocks will end up with different top picks, it does seem that Canadian dividend stock pickers are in agreement on many of those worth considering. Perhaps the limits on dividend stocks available in Canada plays an important role. But it is also likely that since picking dividend stocks relies heavily on historical performance, that different roads end up at the same destination.