I want to increase my chance of investing success. I believe buying solid companies with dividend payments and upside potential can help me achieve this. The dividends pay me to wait for price appreciation. Actually, since these three names tend to increase their dividends over time and have the prospects to deliver respectable long-term returns, they could be good holdings for long-term investment as well.
Without further ado, here are the three dividend stocks I’d buy hand over fist this month.
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TD stock
The Canadian banking sector sold off since peaking in early 2022. The Bank of Canada raising interest rates to combat inflation and a higher risk of a recession by 2024 are some factors of the bank stocks’ weakness.
That said, the big Canadian bank stocks serve as good core holdings for diversified investment portfolios. Particularly, with its North American retail banking-focused business, Toronto-Dominion Bank (TSX:TD) should be well positioned for long-term growth. The stock appears to have been building a base since the second half of 2022, with strong support at $76 per share.
At $84.07 per share at writing, it offers a decent dividend yield of just below 4.6% while investors wait for price appreciation. Based on adjusted earnings per share (EPS), its dividend is protected by a payout ratio of about 46% this fiscal year. The bank targets medium-term adjusted EPS growth of at least 7% per year. So, the bank stock is discounted by about 15% to its long-term normal valuation, trading at about 10 times earnings.
Empire stock
Grocery chain stocks like Empire (TSX:EMP.A) are defensive ideas to hold in diversified portfolios. Particularly, the parent of Sobeys, Safeway, Foodland, FreshCo, and IGA trades at a lower multiple than its peers. The name also offers margin expansion potential, which can help drive higher profits.
At $36.61 per share at writing, it trades at a reasonable price-to-earnings ratio of about 12.8 times earnings. According to the consensus analyst 12-month price target, it offers a discount of about 11%. At this quotation, it also offers a dividend yield of close to 2%.
Empire stock is a Canadian Dividend Aristocrat with a strong track record of maintaining or increasing its common stock dividend over 28 consecutive years. For your reference, its 10-year dividend-growth rate is 7.3%.
Brookfield Renewable Partners
Brookfield Renewable Partners (TSX:BEP.UN) is a top renewable energy stock to own for the long term. It pays a cash-distribution yield of about 4.6%. It is also a dividend grower. Specifically, it has increased its cash distribution for about 13 consecutive years. It tends to increase its cash distribution by about 5% per year. For your reference, its 10-year dividend-growth rate is 5.7%, and its last dividend hike was 5.5%.
Essentially, you get paid to wait while it expands its renewable power and decarbonization solutions business. Its growth projects in its development pipeline are primarily in solar utility (54% of the new generation capacity), distributed generation, storage, and sustainable solutions (24%), and wind projects (20%).
Management targets returns of 12-15% on its investments. Since the stock is undervalued by about 20%, BEP stock should be able to deliver annualized returns at the high end of that range over the next five years.
Bottom line
These three dividend stocks from different sectors are defensive ideas for long-term investment.
