TD Bank, along with RBC, are often the top two stocks by weighting.
If you judge by what portfolio managers are holding, the two must-have dividend stocks in the Canadian market are Royal Bank of Canada and Toronto-Dominion Bank.
Bank of Nova Scotia is another favourite, and Bank of Montreal and Canadian Imperial Bank of Commerce also show up in many portfolios. Outside the banks, Canadian National Railway and TransCanada are popular, and so are Enbridge, Rogers Communications and Suncor Energy. A few U.S. stocks show up as well – McDonald's, Verizon and Johnson & Johnson are the most common.
These are the stocks that come up the most when you look at the recent top 10 holdings of the biggest, best-performing dividend funds. Specifically, the pool of funds considered here represents the largest players among the first-quartile funds over the past 10 years.
These funds differ widely on their sectoral portfolio allocations, particularly on financials. The sector accounted for 47 per cent of one fund's portfolio, while others had a little more than half that weight. And yet, TD and RBC were often the top two stocks by weighting. RBC Canadian Dividend weighted both TD and RBC at 6.9 per cent, tied for the fund's largest positions. TD Dividend Growth had TD in top spot at 8.9 per cent and RBC at 8.5 per cent. This preference for bank stocks isn't a bank thing. Beutel Goodman Canadian Dividend, from the respected no-load fund family of the same name, had TD in first spot at 9.5 per cent and RBC at 8.9 per cent.
You have to use caution in looking at what fund managers hold because you don't know the price they paid. A dominant position in a stock may have been built at lower prices than you'd pay today. That said, both TD and RBC are priced today at levels that offer a solid dividend yield. RBC's yield was above 4 per cent for the week ending March 11, while TD was above 3.5 per cent. Two other stocks that are popular with fund managers and offer a yield above 4 per cent are TransCanada and Enbridge.
Rob Carrick