Updated Canadian Dividend Stock Watchlist

Dividend Stocks

Canadian Dividend Stocks To Buy In 2020

It’s been a while since I’ve updated my watchlist. I haven’t made a stock purchase in a few months. In fact my last stock purchase was back in early March, right when Covid 19 was just starting to really hit North America. If you recall, I had added to my positions in XAW, GoEasy Financial, Chorus Aviation (ouch), Diversified Royalty and finally initiated a new position in New Flyer. I am still happy holding all of these companies long term and the only one that has taken a huge hit was Chorus Aviation.

I’ve increase my bi weekly contributions into my TFSA and although I haven’t purchased anything yet, I’ve had my eye on a few different companies. First a bit of background, so you can better understand my reasons for choosing the stocks below…

1) My RRSP holds mostly just 2 funds. One is XAW(which is about 40% of my total portfolio) and takes care of my USA/Global diversification and the other is an RBC Canadian Equity Income fund(About 25% of my total portfolio).

2) I use my TFSA specifically to hold Canadian Dividend Paying Stocks, so this watchlist will only include Canadian Stocks that pay a dividend.

3) Since about 25% of my portfolio is the RBC Canadian Dividend fund, I TRY to avoid holding the same stocks in my TFSA/RRSP. There are some exceptions (Algonquin Power, New Flyer, etc).

4) My updated watchlist will consist of Canadian Dividend paying stocks, and which meet my custom stock screening criteria. Some metrics I use in my custom stock screen are: Conservative Payout Ratio, Reasonable Price/Earnings, Earnings Growth & Expected Earnings Growth and Debt Levels.

Consumer Staples Stock(s):

Metro & Loblaw

Looking at these two stocks, I don’t believe you can go wrong with either. I would actually like to add them both, however right now I am leaning towards Metro. The only areas where Loblaw comes out on top is:
a) I am extremely familiar with it, I shop there multiple times a month.
b) Current dividend yield is slightly higher, slightly less volatility.

That said, the numbers speak for themselves, and I believe the first one I pick up will be Metro. See for yourself…

Metro looks like the clear winner here. They are trading at a better multiple, they have a much more conservative payout ratio (more room to grow the dividend), and the past 5 years show they are doing just that.


My target price for these stocks are:
Metro: $51.00
Loblaw:$61.00

Financial Stocks


The big banks are all well covered in my RBC Canadian Equity fund, so I will not talk about them here (although I will see, they pretty much all look like great pick ups right about now). I ALMOST grabbed some Bank of Nova Scotia last week when it was trading at 9x earnings. It is still trading under 10x earnings and yielding 6.13%!

I’ve been watching First National & Canadian Western Bank for years. In fact I owned CWB for a while, bought it at $19, sold it around $30. It is a stock that continually has good metrics, but also has crazy volatility usually tied to the Alberta market and oil prices. That said they have diversified away from being a “western” bank and continue to expand. If you don’t like volatility, it’s probably not for you, but it’s got a great history of increasing dividends, a low payout ratio and because of it’s volatility you can periodically scoop it up at a great price.

First National is actually the company I have my mortgage with, and they aren’t your typical financial institution. They work closely with mortgage brokers, and leverage technology better than most of the big banks. I’m a big fan of their online mortgage platform, however the current interest rates, coupled with the increasing amount of Canadian Household Debt may hurt them. First National pays a nice monthly dividend, and insiders own over 10%, which is usually a sign that management has confidence in the business.

Let’s see what the numbers say. I included Bank Of Nova Scotia here as well for reference:

As you can see, all 3 are trading at very reasonable levels, with the edge going to Canadian Western Bank. The dividend yields are all pretty strong as well. The conservative payout ratio as well as the 5 year dividend growth rate also put Canadian Western Bank on top.

Bank of Nova Scotia is the easy set it and forget it pick. It has solid, but not spectacular numbers all around, and you know it will keep doing its thing.

First National has a few risks attached with it, if interest rates stay this low, they will get hurt more than other big banks, and the payout ratio of 78.6% is way too high for my liking (especially in this sector). I own some reits with better payout ratios!

Canadian Western Bank looks like the winner for me here. That said, I still don’t like it enough at it’s current price to pull the trigger. I’ve seen it dip below $20 many times over the last few years, and I expect it (along with most other stocks) will see another huge drop as Covid continues to wreak havoc on us. I love the dividend growth history, low payout ratio and their commitment to diversifying outside of Alberta, and also more into wealth management.

Long term, I don’t think you can go wrong with any of these, and here are my target prices:

BNS: $60 or less. Honestly it’s a good price now. It could drop again, but if you are in it for the long haul, getting this for 9-10x Earnings is a go for me

CWB: $19.99 or lower. Although I would never recommend swing trading – if you had to choose a stock to do it – this may be the one. This one continually goes from $20-$35. I like it for its dividend growth and low payout ratio. I’d be comfortable buying and holding for 5-10 years if I can scoop some up at $20 or less.

First National: $22.50. If I am being honest it’s probably a good price at $25-27 as well, but due to some of the risk, I’d only grab this one if it really falls quite heavily again.

2 Other stocks I want, but am waiting for price to drop …Alimentation Couche Tard & DOLLARAMA
It’s getting late, so I won’t go into these ones too much right now (i’ll probably do a solo write up on each). I am currently waiting for these two to drop to initiate a position.

I actually owned ATD.B previously, but sold it a couple years back, and although I made a nice chunk on that trade, I wish I held on to it. Dollarama is one that I’ve never owned but have wanted to for a while. These two stocks have a lot of similar metrics, both have extremely low yields, but both are growing them at exponential rates. They both have super conservative payout ratios, and have both seen their earnings and profits rise at “growth stock rates” for the last few years. That said, Dollarama has seen a pretty big drop in the rate of it’s growth the last 2 years while ATD has continued to impress. These are another two great stocks for the long haul, which I hope to add both by the end of this year. My target prices are:

Dollarama: $38.00
ATD.B: $40.00

Do you own any of these stocks? Would you consider buying any? Let me know your thoughts.

Cheers.

10 Comments on “Updated Canadian Dividend Stock Watchlist

  1. Hi
    Any reason you prefer RBF591 (who cost a lot in expense) instead of ZDV or XEI or TQCD ..etc… who have a lower MER ? and offers approximativly the same stocks.

    Liked by 1 person

  2. Hi Michel,

    Thanks for reading and the question. I have held the RBC Income fund (series D) for 10+ years, and at one point I did consider switching to a lower fee fund. I looked at the comparables at the time, and the RBC Fund even with a higher fee had outperformed the others. That said at the time I did switch it to the series D version of the fund. The series D fund is the exact same fund, but with a lower MER (albeit still much higher than the ETFs). I wrote about my decision to KEEP the RBC fund here:

    https://moneymaaster.com/2018/01/27/well-that-was-easy-how-a-1-hour-bank-appointment-will-save-me-over-20000/

    I hadn’t looked at the returns recently, so I thought I should. I just checked, and it looks like the RBC fund continues to be the better option:

    ZDV Returns:
    Last 5 Years: 0.62%
    Since Inception: 3.84%

    XEI Returns:
    Last 5 Years: 0.71%
    Since Inception: 3.11%

    RBC Fund:
    Last 5 Years: 2.04%
    Since Inception: 8.69%

    Like

  3. Look at a 5 years chart on stockwatch ,( I don’t have the chart of RBC) , the starting period can change a lot of things.. By the way XIU is not bad on a 5 years period , if I was younger I will switch most of my portfolio on BAM.a..

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  4. The important is you are happy with your portfolio …….I am looking for a permanent portfolio , not an easy job ( I invest for 30 years , live with the trading for 20 years and has been daytrader on future for one year) , as a retired many questions to simplify and have a good revenue with dividends..

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  5. The biggest problem is % sector repartition and choose which stock in this sector and arrive with the good amount in dividend , dividend are like a salary and when retired if you want a good life you need money …..

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  6. You should take a look at EQB as a financial stock trading at a low multiple with huge growth potential and a commitment from management to target a dividend raise of 25% per year. They should also continue to capture the increasing trend of online, branchless banking. Cheers.

    Like

  7. Pingback: July 2020 Dividend Report & Pizza – Moneymaaster

  8. Pingback: 3 New Dividend Stocks Purchased (Finally)! – Moneymaaster

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