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10 Best Canadian Dividend Stocks to Buy Now

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·11 min read
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In this article, we will be looking at the 10 best Canadian dividend stocks to buy now. If you want to skip our detailed analysis of dividend investing, you can go directly to the 5 Best Canadian Dividend Stocks to Buy Now.

Hartford Funds has estimated that 84% of the total return of the S&P 500 index, going back as far as 1970, came from reinvested dividends alongside compounding. At the same time, data compiled by Vitaliy Katsenelson in a book titled "Active Value Investing: Making Money in Range-bound Markets" revealed that between 1900 and 2000, dividends account for more than half (5.5%) of the S&P 500 Index's total return of 10.4%, with the remaining 4.9% being made up of price appreciation returns. These are two examples of numerous reports explaining the importance of dividends and dividend investing, and hence, the popularity of dividend investing as a strategy is unsurprising, with more and more investors piling into more renowned dividend stocks like Medtronic plc (NYSE: MDT), Target Corporation (NYSE: TGT), and The Procter & Gamble Company (NYSE: PG).

Apart from these stocks, Canadian dividend stocks are also considered smart dividend investment options. Canadian bank stocks, for instance, are considered to be among the best dividend investment options out there because of their high yields and reliable payouts, according to Wealth Professional Canada. Even within dividend stocks, however, whether they be Canadian or American or otherwise, certain factors should be taken into account before investing. Post Oak Private Wealth Advisors have mentioned, for instance, that a stock's payout ratio is important to consider. It has been estimated that between 1990 to 2006, dividend stocks that had lower payout ratios were able to outperform dividend stocks with higher payout ratios by about 8.2% each year that was studied. Additionally, citing data from Oppenheimer Funds published in 2014, Post Oak Private Wealth Advisors also quantified their claim that those dividend stocks that managed to grow their payouts were able to perform better than the stocks that retained stable payouts without growing them. Data used stated that the former outperformed the latter by 2.4% each year from 1972 to 2013.

The factors up for consideration before investing in dividend stocks are plentiful and have been covered by a range of authorities including Post Oak Private Wealth Advisors but won't all be mentioned here. What we are focusing on, however, is that dividend investing is a promising and profitable strategy for income investors and others alike, and should thus be pursued, albeit carefully, when possible.

Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and May 29th 2021 our monthly newsletter’s stock picks returned 206.8%, vs. 91% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

10 Best Canadian Dividend Stocks to Buy Now
10 Best Canadian Dividend Stocks to Buy Now

Adam Gregor/Shutterstock.com

With that context in mind, let's look at the 10 best Canadian dividend stocks to buy now.

We have selected stocks based on their popularity among hedge funds, determined by analyzing Insider Monkey's collected data of about 866 hedge funds. We have also taken into account analysts' ratings and fundamentals, to determine each stock's financial stability.

We have listed the number of hedge fund holders and dividend yields of each stock added to our list below as well.

Best Canadian Dividend Stocks to Buy Now

10. Bank of Montreal (NYSE: BMO)

Number of Hedge Fund Holders: 15 Dividend Yield: 3.39%

Bank of Montreal (NYSE: BMO), a diversified financial services company, operates primarily in North America while being headquartered in Montreal, Canada. The company provides checking and savings accounts, credit cards, mortgages, and financial and investment advisory services among a range of others. It ranks 10th on our list of the best Canadian dividend stocks to buy now.

This June, Paul Holden from CIBC raised his price target on Bank of Montreal (NYSE: BMO) shares from $108.17 to $109.75. Additionally, National Bank's Gabriel Dechaine holds an Outperform rating on Bank of Montreal (NYSE: BMO).

In the fiscal second quarter of 2021, Bank of Montreal (NYSE: BMO) had an EPS of $2.58, beating estimates by $0.29. The company's revenue was $4.99 billion, up 23.95% year over year but missing estimates by $197.55 million. Bank of Montreal (NYSE: BMO) has also gained 29.14% in the past 6 months and 30.57% year to date.

By the end of the first quarter of 2021, 15 hedge funds out of the 866 tracked by Insider Monkey held stakes in Bank of Montreal (NYSE: BMO) worth roughly $204 million. This is compared to 11 hedge funds in the previous quarter with a total stake value of approximately $45.8 million.

Like Medtronic plc (NYSE: MDT), AbbVie Inc. (NYSE: ABBV), Target Corporation (NYSE: TGT), and The Procter & Gamble Company (NYSE: PG), Bank of Montreal (NYSE: BMO) is a good dividend stock to invest in.

9. Royal Bank of Canada (NYSE: RY)

Number of Hedge Fund Holders: 18 Dividend Yield: 3.55%

Royal Bank of Canada (NYSE: RY) is a global diversified financial service company that operates through its Personal and Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services, and Capital Markets segments. It ranks 9th on our list of the best Canadian dividend stocks to buy now.

This June, Gabriel Dechaine from National Bank also raised his price target on Royal Bank of Canada (NYSE: RY) shares from $108.94 to $111.33. Dechaine holds an Outperform rating on the stock as well.

In the fiscal second quarter of 2021, Royal Bank of Canada (NYSE: RY) had an EPS of $2.31, beating estimates by $0.23. The company's revenue was $9.63 billion, up 28.22% year over year but missing estimates by $301.19 million. Royal Bank of Canada (NYSE: RY) has also gained 20.93% in the past 6 months and 20.23% year to date.

By the end of the first quarter of 2021, 18 hedge funds out of the 866 tracked by Insider Monkey held stakes in Royal Bank of Canada (NYSE: RY) worth roughly $716 million. This is compared to 18 hedge funds in the previous quarter with a total stake value of approximately $177 million.

Like Medtronic plc (NYSE: MDT), AbbVie Inc. (NYSE: ABBV), Target Corporation (NYSE: TGT), and The Procter & Gamble Company (NYSE: PG), Royal Bank of Canada (NYSE: RY) is a good dividend stock to invest in.

Gator Capital Management, an investment management firm, mentioned Royal Bank of Canada (NYSE: RY) in its first-quarter 2021 investor letter. Here's what they said:

“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:

1. 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.

2. 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..." (Click here to see the full text)

8. Fortis Inc. (NYSE: FTS)

Number of Hedge Fund Holders: 10 Dividend Yield: 3.56%

Fortis Inc. (NYSE: FTS) is a utility company that provides electric and gas services in the US, Canada, and the Caribbean. The company serves about 433,000 retail customers in southeastern Arizona alone, alongside tens of thousands of others in other regions. It ranks 8th on our list of the best Canadian dividend stocks to buy now.

Scotiabank's Robert Hope continues to hold an Outperform rating on Fortis Inc. (NYSE: FTS) shares as of this July.

In the first quarter of 2021, Fortis Inc. (NYSE: FTS) had an EPS of $0.62, beating the previous quarter's EPS of $0.54. The company's revenue was $2.07 billion, up 22.43% year over year and beating estimates by $118.57 million. Fortis Inc. (NYSE: FTS) has also gained 8.14% in the past 6 months and 6.98% year to date.

By the end of the first quarter of 2021, 10 hedge funds out of the 866 tracked by Insider Monkey held stakes in Fortis Inc. (NYSE: FTS) worth roughly $179 million. This is compared to 9 hedge funds in the previous quarter with a total stake value of approximately $206 million.

Like Medtronic plc (NYSE: MDT), AbbVie Inc. (NYSE: ABBV), Target Corporation (NYSE: TGT), and The Procter & Gamble Company (NYSE: PG), Fortis Inc. (NYSE: FTS) is a good dividend stock to invest in.

7. AltaGas Ltd. (OTC: ATGFF)

Number of Hedge Fund Holders: N/A Dividend Yield: 3.81%

AltaGas Ltd. (OTC: ATGFF), a Canadian diversified energy infrastructure company, operates mainly in North America through its Utilities and Midstream segments. The company ranks 7th on our list of the best Canadian dividend stocks to buy now.

Raymond James' analyst David Quezada just this July raised his price target on AltaGas Ltd. (OTC: ATGFF) shares from $19.48 to $25.45. Quezada also has an Outperform rating on the company's shares.

In the first quarter of 2021, AltaGas Ltd. (OTC: ATGFF) had an EPS of $1.03, representing a 63% growth year over year when compared to the $0.63 EPS in the first quarter of 2020. The company's revenue was $2.45 billion, beating the previous quarter's revenue of $1.33 billion. AltaGas Ltd. (OTC: ATGFF) has also gained 41.82% in the past 6 months and 43.07% year to date.

Like Medtronic plc (NYSE: MDT), AbbVie Inc. (NYSE: ABBV), Target Corporation (NYSE: TGT), and The Procter & Gamble Company (NYSE: PG), AltaGas Ltd. (OTC: ATGFF) is a good dividend stock to invest in.

6. Algonquin Power & Utilities Corp. (NYSE: AQN)

Number of Hedge Fund Holders: 10 Dividend Yield: 4.45%

Algonquin Power & Utilities Corp. (NYSE: AQN) is a utility company that operates in Canada, the US, Chile, and Bermuda. The company generates electrical energy for sale through its non-regulated renewable energy generation facilities and operates a range of clean energy facilities. It ranks 6th on our list of the best Canadian dividend stocks to buy now.

Credit Suisse analyst Andrew Kuske holds a Neutral rating on Algonquin Power & Utilities Corp. (NYSE: AQN) while Raymond James has an Outperform rating on the stock as well.

In the first quarter of 2021, Algonquin Power & Utilities Corp. (NYSE: AQN) had an EPS of $0.20, missing estimates by $0.01. The company's revenue was $634.50 million, up 36.48% year over year and beating estimates by $73.74 million. Algonquin Power & Utilities Corp. (NYSE: AQN) has also gained 14.38% in the past year.

By the end of the first quarter of 2021, 10 hedge funds out of the 866 tracked by Insider Monkey held stakes in Algonquin Power & Utilities Corp. (NYSE: AQN) worth roughly $172 million. This is compared to 15 hedge funds in the previous quarter with a total stake value of approximately $298 million.

Like Medtronic plc (NYSE: MDT), AbbVie Inc. (NYSE: ABBV), Target Corporation (NYSE: TGT), and The Procter & Gamble Company (NYSE: PG), Algonquin Power & Utilities Corp. (NYSE: AQN) is a good dividend stock to invest in.

Click to continue reading and see the 5 Best Canadian Dividend Stocks to Buy Now.

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Disclosure: None. 10 Best Canadian Dividend Stocks to Buy Now is originally published on Insider Monkey.