The hottest stocks in Canada in recent years have been the cannabis stocks, but they’ve also been extremely volatile—in both directions. Moves of 10% and even 20% are not uncommon. For a lot of investors, that’s just too much risk.
So today I’m looking at safer group of Canadian stocks – stocks with low risk and big dividends. These low-risk Canadian stocks won’t make you rich overnight, but they will let you sleep well, as they all have low volatility and high dependability. Plus, each one has a positive long-term chart, so you can invest in any one of them and expect to come out ahead in the long run.
Low-Risk Canadian Stock #1: Canadian Imperial Bank of Commerce (CM)
One of the big five banks of Canada, Canadian Imperial Bank of Commerce (better known as CIBC) pays a dividend of 4.3%, which is above average for a bank stock. Yet the payout ratio is 42%, so the dividend is well covered by earnings.
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In the first quarter, CIBC’s sales grew 12% while earnings per share improved 13.5%. Yet the stock’s forward P/E ratio is a modest 9.5.
Earnings forecasts are a bit difficult, thanks mainly to the unknown of interest rate fluctuations, but analysts are looking for earnings of $12.16 this year, up a modest 7% from last year, though sales are expected to improve 10%. Of course, that projection is already baked into the stock to a large degree.
CIBC is definitely forward-looking. It was the first bank in Canada to release an iPhone banking app (in 2010). It was the first bank in Canada to offer all three leading mobile wallets. And it was the first major Canadian bank to introduce free mobile credit scores for clients. Also, CIBC was one of two banks to earn the highest overall score in The Forrester Banking Wave: Canadian Mobile Apps.
As to the chart, it’s been generally positive since the March 2020 market bottom, running from 46 to new highs above 131 before trading lower and finding support near 114. With possible overhead resistance looming at the February/early-March lows and the approaching 50-day line it may pay to wait for a decisive show of strength and a breakout to initiate a position.
Low-Risk Canadian Stock #2: Pembina Pipeline (PBA)
Pembina pays the highest dividend of the group, 4.9%. But you’ve got to sit through some bumps if you hold this stock, given the ups and downs of oil prices.
The company operates over 10,000 kilometers of pipeline across Alberta and British Columbia, moving both natural gas and other petroleum products across the country and into the U.S.
Fourth-quarter 2021 results saw revenues beat the consensus estimates by 32%, while earnings missed due to losses on commodity hedges and lower pipeline contributions.
As to the chart, it is often a slow and steady climber—but not always. After spending 2020 and 2021 recovering from a 60% drop due to the arrival of the pandemic, the stock has rocketed 33% higher YTD and is now trading above pre-pandemic highs.
Low-Risk Canadian Stock #3: Restaurant Brands (QSR)
The restaurant industry was hit hard by Covid, but the professionals at Restaurant Brands came through only slightly scathed, and primed to grow from here. This plain name owns three of consumers’ favorite fast-food brands: Burger King, Tim Hortons and Popeyes Louisiana Kitchen. All told, its holdings bring in $30 billion in system-wide sales from over 24,000 restaurants in more than 100 countries and U.S. territories.
Burger King is the biggest contributor to the business, accounting for 67% of revenues, but Popeyes, the smallest contributor, is growing the fastest.
In the fourth quarter, revenues grew to $1.55 billion, while earnings came in at $0.74 per share.
The quarterly dividend is 3.5%.
As for the stock, while it crashed hard to the March 2020 bottom, eventually finding a nadir at 25, it quickly came roaring back, and in recent months has found support in the 53-54 range. I think buying on any normal correction will work out fine, especially if you love dividends.
Low-Risk Canadian Stock #4: Telus Corp (TU)
Telus is one of the major Canadian telecom providers, providing everything from dial-up phone service to internet access to streaming video. (They claim to have the fastest wireless network in Canada.)
Long-term trends are excellent, if slow; the company has grown revenues by single-digit percentages every year of the past decade.
In the fourth quarter of 2021, the company added 193,000 new wireless, internet and TV customers, as well as a best-ever 79,000 new wireline customers.
Revenues grew 20% to $4.9 billion, while earnings came in at $0.23 per share. Looking forward, analysts are expecting earnings of $0.99 per share for the whole year. The dividend is 3.8%.
As for the stock, it bottomed at 14 in March 2020, climbed quietly back up to its old high by January 2021, reached new highs in May and September of last year, and just recently broke out to even greater heights above 26.
The Best Stock of the Four
Any one of these Canadian stocks might be a fine long-term holding, but what if you’re more short-term oriented? What if you want to benefit from an up-cycle and then avoid the down-cycle?
Investors comfortable chasing momentum should focus on the stocks hitting new highs today—Pembina Pipeline (PBA) and Telus (TU). Contrarily, investors looking to avoid sectors that have benefited from this year’s rotational action should consider CM or QSR.
Do you own any Canadian stocks? Any Canadian dividend payers that you like? Tell us about them in the comments section below!
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More
*Note: This post has been updated from an original version, published in 2019.