I say that jokingly, but the reality is that investors who put all their capital to work in US mega-cap tech stocks have outperformed investors in Canadian dividend stocks by orders of magnitude over the past decade.
That said, and I don’t have my crystal ball with me here today, but I’m not sure that will be the case over the next decade. I believe that dividend-paying stocks with a solid balance sheet could outperform in the medium to long term. And these are two of my top picks that I’m keeping a close eye on in this regard.
SmartCentres REIT
I recently wrote a post about SmartCentres REIT (TSX:SRU.UN), which got me excited about this real estate investment trust all over again.
What SmartCentres offers is high-quality commercial real estate in urban centers across Canada. It is striking that the company’s real estate portfolio is usually anchored by one important tenant: Walmartwhich provides each location with a very consistent flow of foot traffic and a lot of stability from a net income perspective.
With a shared yield of 7.4%, a reasonable multiple, and a business model that requires SmartCentres to return 90% or more of its net income to shareholders in the form of distributions, this stock is one I would call a dividend investor’s dream.
Retail real estate can be a difficult place to invest in, unless it is a company like SmartCentres with a rock-solid tenant base and a low occupancy rate. This is one of those unique opportunities that I think investors will get wind of soon.
Zoncor
Another top Canadian dividend stock that I have long viewed as a value stock, or a play in the energy sector, is Zoncor (TSX:SU).
In particular, there are a wide range of reasons why long-term investors would want to own this name. Given the company’s valuation of just 14 times earnings and a dividend yield of almost 4%, there’s a lot to be said about Suncor’s risk/reward profile in this uncertain market.
With increased attention to energy security in North America from both the Canadian and US governments, this is a company that should benefit from a positive macroeconomic backdrop for some time. And given the company’s rock-solid balance sheet and rising production potential, I think Suncor is a good fit for most long-term investor portfolios in this environment.
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