After two long years of surging inflation and higher interest rates, the economy is finally starting to turn around, creating an excellent opportunity for the smartest investors to buy some of the top dividend stocks in Canada right now.
In general, lower interest rates are positive for dividend stocks for two reasons. Firstly, the price of dividend stocks typically moves inversely to interest rates. So, as interest rates fall, so too will the yields these stocks offer as their share prices rise.
Secondly, lower interest rates also lower the cost of servicing debt for many of these companies, which should improve their economics and margins, leading to higher profits and, consequently, higher share prices.
Therefore, while policymakers are still in the process of lowering rates and many of these top Canadian stocks still trade off their highs, it’s the perfect time to buy some of the smartest dividend stocks right now, with as little as $500.
Source: Getty Images
One of the top dividend stocks to buy on the TSX
If you’re looking for the smartest dividend stocks to buy right now, there may not be a better stock to consider than Telus (TSX:T), the $32 billion telecom stock.
Telecom stocks like Telus are regarded as some of the safest and most reliable stocks due to the essential services they offer and significant cash flow they consistently generate.
In fact, Telus has been growing its earnings and cash flow so quickly in recent years that it hasn’t just been increasing its dividend annually; it’s been increasing its dividend payments once every other quarter.
Furthermore, over the next few years, Telus expects to continue increasing its dividend by roughly 7% each year. That’s significant growth potential, especially when you consider that Telus’ stock is so cheap today that its dividend yield is sitting at a whopping 7.6%.
That’s not only a significant yield for such a reliable stock and one that offers substantial dividend growth potential, but it’s also significantly higher than its three and five-year average yields of 5.7% and 5.4%, respectively.
Furthermore, Telus is trading at an enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio of just 8.2 times. That’s below both its three and five-year average EV/EBITDA ratios of 8.8 and 8.7 times, respectively.
Therefore, while one of the top dividend growth stocks in Canada trades undervalued and offers an unbelievable dividend yield, there’s no question it’s one of the smartest dividend stocks to buy with $500 right now.
A top Canadian REIT offering investors exposure to residential real estate
In addition to Telus, another of the best Canadian dividend stocks to buy right now is Morguard North American Residential REIT (TSX:MRG.UN).
It’s well-known that real estate stocks, especially residential real estate stocks, are some of the best investments for passive income generation. Furthermore, with interest rates on the decline Morguard has a tonne of potential to see a significant rally.
The main reason to buy the stock, though, is for its exposure to the residential real estate industry. What’s especially compelling about Morguard is that it owns assets that are diversified in several states south of the border as well as in Canada.
This diversification is significant because it helps mitigate risk and increase the opportunities Morguard has to grow its operations.
For example, just a few years ago, the majority of its growth came from its portfolio south of the border, as average monthly rent rates rose rapidly, especially in southern states like Florida.
More recently, though, growth in rental rates has slowed south of the border but has picked up in Canada, allowing Morguard to continue expanding its operations and growing its distributions.
It’s also worth mentioning that Morguard just increased its distribution again, and with the stock trading off its highs, the yield is now sitting above 4.1%.
So, if you’ve got cash that you’re looking to invest today, there’s no question that Morguard is one of the best dividend stocks that you can plan to buy now and hold for years.
