4 Low-Risk Canadian Stocks with Big Dividends

Canadian Growth

The hottest stocks in Canada in recent months have been 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 a safer group of Canadian stocks—specifically, low-risk Canadian stocks with 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 5.5%, which is above average for a bank stock. Yet the payout ratio is 48%, so the dividend is well covered by earnings.

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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, Q2 2018 report.

As to the chart, it’s been generally positive since a big dip in the fourth quarter of 2018 (like almost every stock), running from a December bottom of 74 to as high as 87. It’s back down to 78 but has been on an uptick since the calendar flipped to June. If it breaks above 81 (its 200-day moving average), it could continue higher for quite some time.

Low-Risk Canadian Stock #2: Pembina Pipeline (PBA)

Pembina pays a strong dividend, at 5.0%. 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.

After a big 2018, Pembina’s sales and earnings are expected to slow in 2019, to 2% and 12%, respectively. But with a P/E of 19, the valuation is at least reasonable.

As to the chart, it looks great, but bumpy. Over the past four months the stock has climbed from 28 to a high of 37, and the current pullback to 36 provides a decent entry point with a breakout likely coming.

Low-Risk Canadian Stock #3: Restaurant Brands (QSR)

This plain name owns three of consumers’ favorite fast-food brands—Tim Horton’s, Burger King 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.

The quarterly dividend is 3.1%. Growth is fine – analysts anticipate 5% sales growth and 10% EPS growth this year, though both figures are down from 2018.

As to the stock, it’s trending quite nicely, vaulting from 50 to 67 since the Christmas bottom. You can buy on pullbacks; any push above its current 61-to-67 trading range, which QSR has been trapped in since a big gap up in late January, would be quite bullish.

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. The most recent quarter was consistent with that trend, with sales up 4.1%; earnings growth was a tad better at +4.4%.

The dividend is 4.5%.

As to the stock, it just broke above yearlong resistance, which is a very bullish-looking move.

Telus (TU) is one of our four favorite low-risk Canadian stocks with big dividends.The Best Stock of the Four

Any one of these low-risk Canadian stocks with big dividends 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?

For my money, the best bet today is Telus Corp (TU). It’s just poking out to new highs and seems poised for a big run, especially now that the market has gotten going again.

Timothy Lutts

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*Note: This post has been updated from an original version.


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