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What are we looking for?

Bargain, high-yielding stocks set to gain as the Bank of Canada keeps its benchmark interest rate steady.

The screen

The central bank’s decision this week to keep rates steady for the second straight meeting suggests its two-year monetary-tightening campaign has finally come to an end.

That’s good news for financial-sector stocks, which have seen their share prices fall on fears of surging loan defaults resulting from climbing interest rates. Higher rates also affected utilities. Historically, their high debt loads are compounded by any central bank move to nudge interest rates upward.

We think now is a good time to pick up top-quality financial and utility stocks given their current cheap valuations and high yields – also their strong prospects for growth on cooling interest rates.

This search starts with an extensive list of dividend-paying Canadian financials and utilities. We then applied our TSI Dividend Sustainability Rating System to home in on those offering high, sustainable yields – as well as accelerated growth prospects as interest rates normalize. Our system awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company is an industry leader.

Companies with 10 to 12 points have the most-secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Bargain-priced and high yielding dividend stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Bil.)1Y Ttl. Rtn. (%) Recent Price ($)
1Enbridge Inc.ENB-THighest118.093.8-14.044.53
2TC Energy Corp.TRP-THighest117.946.7-18.647.39
3BCE Inc.BCE-THighest117.647.0-14.451.22
4Telus Corp.T-THighest116.532.4-21.422.28
5Toronto-Dominion BankTD-THighest105.0139.8-12.076.92
6Bank of Nova ScotiaBNS-TAbove Average97.667.7-14.455.97

Source: Dividend Advisor.

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.

Our TSI Dividend Sustainability Rating System generated six stocks: Bank of Nova Scotia and Toronto-Dominion Bank, both headquartered in Toronto, are Big Five stalwarts. Pipeline operators TC Energy Corp. and Enbridge Inc., both based in Calgary, have strong cash flow and growth projects to keep dividends rising. And finally, Montreal’s BCE Inc. and Vancouver’s Telus Corp. continue to profit from selling telecom services to Canadians. Recent exhaustive upgrades to their wireless and fibre-optic networks will only add to those gains.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 01/03/24 4:00pm EST.

SymbolName% changeLast
Enbridge Inc
TC Energy Corp
Telus Corp
Toronto-Dominion Bank
Bank of Nova Scotia

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