Summer is the perfect time to grab a cold beverage, put out the lawn chair – and start picking some great dividend stocks.
Even though many dividend payers have started to recover from the interest rate-related sell-off earlier this year, plenty of companies still offer attractive valuations, above-average yields and solid prospects for dividend growth.
For today’s column, I’ve chosen five companies from my Yield Hog Model Dividend Growth Portfolio whose share prices are still well below their 52-week highs. That means you’ll be getting more dividends for every dollar you invest.
So pour yourself a lemonade (picking stocks while drinking beer is not recommended) and let’s get busy. Remember to do your own due diligence before investing in any security.
Enbridge Inc. (ENB)
Yield: 5.9 per cent
Shares of Enbridge have gained about 4 per cent since June 28, when the Minnesota Public Utilities Commission approved – with minor modifications and conditions – the company’s controversial Line 3 Replacement Project. Yet, analysts say the stock still has room to run. Although L3R could still face legal challenges, “the decision materially reduces the risk for this project,” CIBC World Markets analyst Robert Catellier said in a note. Enbridge delivered more good news the following week when it announced the sale of its natural gas gathering and processing business in Western Canada to Brookfield Infrastructure Partners LP for $4.31-billion in cash, enhancing Enbridge’s financial flexibility as it seeks to fund its ambitious growth plans.
A&W Revenue Royalties Income Fund (AW.UN)
Yield: 5.3 per cent
A&W’s same-store sales have grown for 19 of the past 20 quarters – including a 5.3-per-cent increase in the first three months of 2018 – helped by the burger chain’s focus on high-quality ingredients, the launch of all-day breakfast and frequent promotions designed to drive traffic. Buoyed by its strong results, A&W has raised its distribution six times since the start of 2015. Yet, the shares are trading below their levels of two years ago, which makes them especially appetizing right now. Here’s another reason to like A&W: The chain still has plenty of room to expand, especially in Ontario and Quebec where A&W has much lower penetration compared with Western Canada. “Based solely on the current density of stores in Western Canada and the populations in Ontario and Quebec … these markets [in Eastern Canada] could support double their current store count,” Laurentian Bank Securities analyst Elizabeth Johnston said in a note.
BCE Inc. (BCE)
Yield: 5.4 per cent
The wireless industry is benefiting from strong subscriber and revenue growth, thanks to steady immigration, increasing smartphone penetration and higher data consumption. This is all good news for BCE: Analysts expect that the company will add about 100,000 postpaid wireless customers in the second quarter, up from an increase of 68,487 subscribers in the first quarter. BCE’s quarterly results – to be released on Aug. 2 – should also get a lift from the company’s fibre-to-the-home product in Toronto, although the rollout could also lead to higher costs, analyst Maher Yaghi of Desjardins Capital Markets said in a note. Another concern, he said, is BCE’s media business, citing pressures on ad spending and weak results at competitor Corus Entertainment Inc. Given the risks, buying BCE on weakness may be a prudent strategy.
CT Real Estate Investment Trust (CRT.UN)
Yield: 5.7 per cent
CT REIT is the real estate arm of Canadian Tire, which is both the REIT’s largest tenant and majority unit holder. It’s not the sort of stock that will produce huge returns, but if you’re look for slow, steady, reliable growth, you’ve come to the right place. Since CT REIT was spun off in 2013, it has raised its distribution every year, including a 4-per-cent increase announced in November. And I’ll bet you a bucket of Canadian Tire hockey pucks that the REIT will raise its distribution again this fall. Unfortunately, CT REIT’s unit price has tumbled about 8 per cent since I launched my model dividend portfolio in late September, but for new investors the drop is a gift as the yield hasn’t been this high since late 2014.
Emera Inc. (EMA)
Yield: 5.3 per cent
Emera’s shares tumbled earlier this year amid worries about U.S. tax reform and concerns about the company’s ability to deliver on its 8-per-cent annualized dividend growth target. But the future is still bright for the utility, whose capital plan includes more than $5-billion of investments at its Tampa Electric subsidiary, including solar power projects and the conversion of a coal generation plant to natural gas. With Emera’s earnings expected to grow by about 7 per cent to 9 per cent annually through 2022 and the shares trading at a multiple of about 14 times estimated earnings – the lowest since 2004 – analyst Jeremy Rosenfield of Industrial Alliance Securities recently upgraded the shares to “strong buy” from “buy."
Disclosure: The author holds ENB, AW.UN, BCE, CRT.UN and EMA personally and in his Yield Hog Model Dividend Growth Portfolio.