Wouldn’t it be nice to own assets that will pay you income without you having to lift a finger? You can buy Canadian dividend stocks that pay out eligible dividends that are favourably-taxed in non-registered accounts.
The current market correction provides the rare opportunity to buy stocks at discounts. Here are five Canadian dividend stocks with dividend yields of at least 4% that I’m eyeing to buy.
TD Bank stock yields +4.3%
I don’t have a crystal ball and can’t know for sure that Toronto-Dominion Bank (TSX:TD(NYSE:TD) will fall lower from current levels. In the grand scheme of things, it doesn’t matter whether I buy now or three months later.
What matters is that I buy the quality dividend stock when it trades at a good valuation. So, when I had some extra cash leftover from my paycheque this month, I picked up some shares.
The fundamental analysis graph shows that the dividend stock is discounted by +15% from its normal long-term price-to-earnings ratio (P/E). Since TD stock’s dividend is safe and will grow in the long run, it means I locked in a yield of +4.3%.
TD Bank stock serves as a core holding in many dividend portfolios. I’m highly considering holding it for growing passive income. If I have extra cash over the next months and the stock remains discounted, I will likely add to my position.
TELUS stock yields close to 4.7%
TELUS (TSX:T)(NYSE:TU) stock offers a similar discount as TD stock. Its last-12-month payout ratio was less than 64%. Although its recent free cash flow was negative, the cash flow can quickly bounce back on a reduction of capital expenditure.
Furthermore, it has retained earnings on its balance sheet that can cover about 3.7 years of dividend payments. So, TELUS’s 4.7% yield is safe and competitive investors seeking income.
Dream Industrial REIT yields 5.6%
While I expect the common stocks of TD and TELUS to increase their dividends over time, I can’t say the same for Dream Industrial REIT (TSX:DIR.UN). It simply doesn’t have that kind of cash-distribution-increasing culture.
The REIT seems to be more focused on expanding its industrial real estate portfolio. That said, it does compensate with a relatively high yield of 5.6% after the market selloff. It’s also convenient that it pays out a monthly cash distribution that’s perfect for paying the bills.
According to Yahoo Finance, the average 12-month price target across 9 analysts is $17.25, which suggests a meaningful discount of 28%.
Canadian Net REIT yields 5%
Rising interest rates also triggered a selloff in other REITs, including Canadian Net REIT (TSXV:NET.UN) that invests in commercial real estate. It has interests in 100 properties in Eastern Canada.
The Canadian REIT enjoys a high occupancy of ~99% and triple-net and management-free leases that increase the quality of its cash flow. Insider ownership is also strong at ~14%. Importantly, the REIT tends to increase its cash distribution and has an above-average five-year cash distribution growth rate of 13.3%.
The monthly cash distribution stock yields almost 5%. I’ve simply turned on dividend reinvestment to buy more shares at bargain prices.
Aecon stock yields 5.8%
The fundamental analysis graph below clearly displays Aecon (TSX:ARE) as a cyclical stock. The stock is cheap now with analysts calling a discount of almost 29%.
Aecon stock could easily be a $21-24 stock three to five years down the road. It pays a generous yield of 5.8% for the wait.
Its payout ratio has little buffer to protect its dividend right now. However, it’s reassuring that its retained earnings can cover 9.9 years of dividends. Of course, it would be irrational to expect the company to retain all these earnings for the dividend.
Regardless, the retained earnings of +$422 million indicates that through economic cycles, the company has been profitable. And it has a strong dividend history as proof of the company’s culture to share wealth with shareholders in the form of a consistent and growing dividends. Since 2008, Aecon has maintained or increased its dividend.
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Disclosure: As of writing, we own Aecon, Canadian Net REIT, Dream Industrial, and TD.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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