Big-name Canadian dividend stocks with upside potential

These stocks are yielding dividends greater than those of the S&P/TSX Composite index, and have some room to run.

Vikram Barhat 19 October, 2016 | 5:00PM
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Market volatility over the last year has sent yield-seeking investors rushing to steadier dividend-paying stocks. However, high equity valuations and meagre dividend yields on many Canadian stocks mean investors may need to dig deeper for quality dividend payers with steady cash flow and some potential for price appreciation.

With their consistent, bond-like stream of income and an opportunity for capital growth, these stocks present attractive investment opportunities. Dividend yield is calculated by dividing annual dividend income by the current stock price. An oversized yield, therefore, could be a sign of a falling stock price. Given the stock market's stretched valuations, investors need to be judicious in their stock selection and not get blinkered by companies' lofty dividends. Close attention must also be paid to a company's growth potential, both in terms of business and dividend payment.

Select stocks in Morningstar's Canadian equity coverage universe offer healthy dividend payouts, well above the 3.2% generated by the S&P/TSX Composite Index. These top-yielding stocks are also trading below their fair value, offering some margin of safety and potential for future capital appreciation. As well, these companies have durable businesses that can weather challenging market conditions.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Cameco Corp32.06 CAD-0.53
Great-West Lifeco Inc36.97 CAD0.08Rating
Nutrien Ltd86.69 CAD0.16Rating
Royal Bank of Canada133.23 CAD0.65Rating

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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