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Canadian dividend stocks

Investing in the best Canadian stocks to buy right now will lead you towards dividend-paying blue chips, bank stocks, and more

Are you looking for the best Canadian stocks to buy right now? For a start, we think investors should have the bulk of their investment portfolios in a well-diversified group of high-quality, mostly dividend-paying stocks.

Canadian blue-chip dividend stocks are an important contributor to your long-term gains, and dividend-paying stocks tend to expose you to less risk than non-dividend-payers. That’s why the majority of your stocks should be dividend-payers at all times.

True Blue Chips pay off

Learn everything you need to know in 'The Best Blue Chips for Canadian Investors' for FREE from The Successful Investor.

Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CAE Inc. Stock and more.


Find out why bank stocks are among the best Canadian stocks to buy right now

Bank stocks are shares of financial institutions that are licensed to receive and hold deposits and also lend money out to individuals and businesses. We’ve long recommended that most Canadian investors should own two or more of the big five Canadian bank stocks (TD Bank. Bank of Nova Scotia, CIBC, Bank of Montreal and Royal Bank). That’s mainly because of their importance to Canada’s economy. They are also key lower-risk investments for a portfolio. The big five Canadian bank stocks also have long histories of annual dividend increases.

We believe Canada’s bank stocks are well positioned to weather downturns in the Canadian economy. In addition, they trade at attractive multiples to earnings and have above-average dividend yields.

Conservative or income-seeking investors may want to emphasize utilities and Canadian banks in their portfolios, because of the high and generally secure dividends that these stocks provide.

We feel that high-quality bank stocks should be part of every investor’s portfolio. Bank stocks and the Canadian financial sector, in general, are known for their lower volatility and sound earnings—and they are among the safer investments you can make.

Here’s why dividend-paying blue chips are some of the best Canadian stocks to buy right now

The best blue chips offer both capital gains growth and regular income through blue chip dividends. The dividend yield is certainly one of the most concrete indicators of a sound investment. It is the percentage you get when you divide the current yearly dividend payment by the share or unit price of the investment. It’s an indicator we pay especially close attention to when we select stocks to recommend in our investment newsletters.

Stick to dividend payers and you’ll avoid most of the market’s greatest disasters.

We like high-quality blue-chip consumer product companies because they can provide stability during a recession or economic slowdown. Typically, consumer products companies sell staples, like soap, soup and beverages, that consumers must buy no matter what the economy is doing.

Strong consumer product companies share a number of characteristics. These include geographic diversity to protect them from regional economic difficulties, a record of rising cash flow and strong balance sheets. All these are characteristics of blue-chip consumer stocks.

We believe that a record of increasing dividend payments is a good indication of a strong company, especially in a slow economy. High-quality blue-chip stocks will usually be in a position to remain profitable during almost any type of economic hardship or recession. Plus, you get paid blue-chip dividends and earn income while you hold these stocks even if share prices are falling.

Spinoffs are among the best Canadian stocks to buy right now

We can say without reservation that spinoff investing is the closest thing you can find to a sure thing. It all comes down to the incentives.

Companies do spinoffs when they feel it isn’t a good time to sell, often resulting in undervalued stocks. That probably means it’s a good time to buy.

When it comes to a corporate spinoff, a number of studies have shown that after an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years. For that matter, the parent companies also tend to outperform comparable firms for several years after a spinoff.

Oddly enough, many investors react to spinoffs as a nuisance, because they leave you with a tiny holding in a stock you didn’t choose and know little about. As a result, these investors may dump any spinoffs they receive as soon as they get around to it. However, we think they’d be better off to buy more of any spinoff they receive, because spinoffs seem to come with the odds set in the investors’ favour.

One group of investors who might be more than willing to buy a new spinoff are seekers of undervalued stocks who follow our Successful Investor philosophy. And on the whole, it pays to follow the lead of these value seekers. You should have the patience to hang on through a period of sluggish trading, while reluctant spinoff holders exercise their urge to sell.

Use our three-part Successful Investor approach to find and select the best Canadian stocks to buy right now

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight.

Short-term traders may disagree with the assessment of investing in blue chip dividend stocks. If you fall into this category, where would you prefer placing your money when it comes to the market’s “best” stocks?

What characteristics do you look for in top-performing stocks?

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