2018 Dividend Stocks for Consideration

If you are a long time reader of this blog, you probably have noticed that I haven’t been writing as many investment related posts (i.e. dividend stock transactions, considerations, evaluations, etc) . Rather, I have been writing more about my thoughts on financial independence retire early (FIRE), and other things I have been learning and experiencing on our quest for financial independence and joyful life.

There are quite a number of reasons behind this shift. Mostly because I think writing non-investment specific posts is more insightful. They are also more fun to write because I write in a style that is more raw. Also, I figured, if you want to read the stock analysis, there are other websites that can do a way better write-up than me.

However, over the past few months, many readers have emailed me and asked which dividend stocks we are considering for 2018.

I guess people are asking because of the new TFSA contribution room.  In 2018, eligible Canadians are allowed to add $5,500 into their TFSA account. So, by popular demands, here are some Canadian dividend stocks we are considering to add in 2018.

In case you are wondering, here is our list of the top Canadian dividend stocks. The stocks listed on there are stocks that we are always looking to add more shares.

Bank of Nova Scotia (BNS.TO)

 We own a bit of Bank of Nova Scotia already but I think we can potentially add more. I really like owning BNS for the dividend yield and the company’s ability to continue raising its dividend payout year over year. During the financial crisis, BNS didn’t cut its dividends, unlike many American banks.

Bank of Nova Scotia is one of the most diversified Canadian banks. It has been expanding into Latin America the last number of years and now serve people in North America, Latin America, the Caribbean, Central America, and Asia-Pacific. It is no longer just a Canadian bank. Bank of Nova Scotia also offers a large range of products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets.We plan to buy more of BNS for the geographical diversification reason. The Canadian debt level and housing market are slightly worrisome, so purchasing a bank that is well diversified outside of Canada may be a good idea. I like the idea that BNS has branches and have tens of millions of assets in Latin American, Europe, and Asia.

It certainly doesn’t hurt when BNS has been paying dividends to shareholders since the 1800’s.

Although Bank of Nova Scotia didn’t make it into our Top 5 long-term holding list, it is definitely on the top 10 list.

BNS has been yielding around the 4% range. If the price drops a bit which means the dividend yield goes up (dividend yield is calculated by taking dividend amount divided by price), it may make sense to buy some BNS shares.

Laurentian Bank of Canada (LB.TO)

Laurentian Bank has seen its share price retreating the last little while. At a PE ratio of 9.9, it is one of the cheapest Canadian banks available from a PE ratio evaluation point of view. With a 10-year dividend payout increase streak and a 10-year dividend growth rate of 7.8%, LB has a solid dividend track record.

LB certainly isn’t as big as the big 5 Canadian banks, with most of its branches in eastern Canada. So from a future growth point of view, LB may not grow as quickly compared to its Canadian peers.

One of the concerns with Laurentian Bank is that it has high exposure to residential mortgages. In the fourth-quarter earnings, LB disclosed that an internal audit found some documentation issues on some mortgages it had sold to a third-party company. As a result, the bank has decided to buy back $392 million of problematic mortgages from the third-party.

Having said all that, I think at the current share price, it may make sense to purchase some shares of LB, collect dividend income, and see what the future holds.

Furthermore, it also makes sense to expand our banking exposure to outside of the Canadian big 6. Laurentian Bank of Canada is relatively small compared to the Canadia big 6. If LB manages to grow outside of eastern Canada and possibly internationally in the future, the earnings will up.

Canadian Utilities (CU.TO)

Canadian Utilities sits at top of the Canadian dividend all-star list with 46 consecutive years of dividend increase. At a dividend yield of over 4%, a payout ratio of 76.5%, and a 10-year dividend growth rate of 8.6%, I am really surprised that we don’t own any shares.

Utilities have not been a strong focus within our dividend portfolio. Perhaps it makes sense to increase our exposure to the utility sector. Since we already own the likes of Fortis, Hydro One, Emera, and Brookfield Renewable Energy, adding CU would allow us to increase diversification within this sector.

The nice thing about utility stocks is the dependable cash flow and an incredibly wide economic moat. It is incredibly hard to start a new utility company from the ground up, so Canadian Utilities doesn’t particularly face too many competitions. Holding Canadian Utilities for the long term simply makes sense to me as it offers long-term income (from dividends) and stability.

Emera (EMA.TO)

We have been nibbling on Emera shares throughout 2017, adding a few shares whenever the price drops. In the past few months, the stock price has continued to drop, which meant its dividend yield is almost at 5%.

Emera is one of Canada’s largest diversified utility companies and has raised dividend payout for 11 years straight with a 10-year dividend growth rate of 9%. In case you aren’t familiar with Emera, the company invests in electricity generation, transmission and distribution, gas transmission and distribution, and utility energy services. Emera has been focusing on shifting from high carbon to low carbon energy sources. In other words, Emera is investing in cleaner energy solutions like hydro, wind, biomass, and solar energy.

While the dividend growth rate is only in the single digit, the high initial dividend yield can be quite enticing.  The dividend amount paid has actually doubled since 2009. This is a good example of how explosive dividend income can be when a stock has high dividend yield and a healthy dividend growth. Therefore, we may continue what we did throughout 2017 and continue nibble on Emera shares throughout 2018.

Now you may wonder why invest in utility when the interest rate is going up and the utility industry may not as high returns compared to some dividend stocks in other sectors. The thing is, the utility industry is slow but people need to use electricity and gas. Today’s society relies heavily on electricity and gas. Emera is in a good position to provide such crucial service. Due to the fact that Emera provides such crucial service to the society, I see Emera as a guaranteed cash generation business. The company will continue rewarding shareholders with dividend payments and the dividend payout will continue to grow for many years to come.

Magellan Aerospace Corp (MAL.TO)

Magellan Aerospace Corp popped up when I was reviewing the Canadian Dividend All-Star list.

From Google Finance:

Magellan Aerospace Corporation is a Canada-based supplier of components to the aerospace industry and in certain applications for power generation projects. The Company engineers and manufactures aeroengine and aerostructure components for aerospace markets, including products for defense and space markets, and complementary specialty products. Its segments include Aerospace and Power Generation Project. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defense and commercial aviation. The Power Generation Project segment includes the supply of gas turbine power generation units. Within the Aerospace segment, the Company’s product groupings include aerostructures and aeroengines. It manufactures complex cast, fabricated and machined gas turbine engine components, both static and rotating, and integrated nacelle components, flow paths and engine exhaust systems for various aeroengine manufacturers.

Basically, MAL is in a very specialized sector. The company started paying dividends in 2013 and has increased dividend payout every year since. The dividend yield is below 2%, but MAL has been increasing dividend payout at above 15% rate each year (its 3-year dividend growth rate is 17%). Furthermore, at the current payout ratio of 20%, the company should be able to continue the impressive dividend growth for years to come. This stock would definitely fall into the low yield high growth category.

What I like about MAL, is that it is in a highly specialized niche market. In September 2017, the company announced that it was selected by Airbus to design and build exhaust systems for the A320neo Pratt & Whitney 1100G-JM engines Nacelle. It is expected this program will generate in excess of $200 million CDN in the first ten years of the life of the program. MAL also has a long history of working with Boeing on their fleets. With airlines looking to invest in more fuel-efficient planes, MAL may be a solid pick up.


The stocks listed above are some of the dividend stocks that we are very likely to add to our portfolio in 2018. Please note, these are simply considerations and by no mean a recommendation to purchase these stocks. Please evaluate these stocks and make purchase decisions on your own.

Dear readers, are there other dividend stocks you are considering?

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16 thoughts on “2018 Dividend Stocks for Consideration”

  1. Finally sold our position in LIQ with a small profit (after a nice rebound over the last few months). Now have about $5k available to reinvest and was looking for some options. We own most of the above shares already, but perhaps I need to increase of few of these positions. Thanks for the write up Bob.

  2. Nice list Bob. Cu is a great buy at the moment. I just sold off my hydro one position, added funds and bought cu. Bns has alot of interest lately for their diversification. Like you I believe if the bubble pops people will be scooping up real estate. Myself included. I would like to atleast get one rental unit.

    Anyways nice list.

  3. Hey, Bob. Thanks for sharing your perspective on some solid Canadian dividend stocks. Two quick questions. I’ve come across some articles suggesting that the Canadian housing market is in bubble territory. One, do you think this is true? And, two, if so, do you think a housing correction would hurt the banks you mentioned? Hope all is well in Vancouver. Go Canucks!

    • Hi Mr. Groovy,

      I think the Canadian housing is in bubble territory… but for places like Vancouver and Toronto, two very highly desirable places, I think any corrections will be somewhat minor (when the price does drop, ppl will go in and buy). Other Canadian cities I can’t say the same.

      Yes, the housing correction might hurt some banks, but many of the Canadian banks have been diversifying their Canadian market exposure by expanding outside of Canada.

      Go Canucks go, hopefully they’ll get the #1 draft pick this year. 😀

  4. Thanks for sharing!

    While I mostly invest in US companies, it’s always great to hear what other people look for in a good investment.

    I like your reasoning behind Magellan.

  5. Hi Tawcan,
    Nice summary. Being a US based dividend stock investor and tax payer, I do not normally invest across the boarder due to the 15% dividend withholding tax we pay on Canadian dividends. My loss, there are so many good Canadian dividend paying companies. Tom

  6. I have about enough companies in my portfolio now, so I used my TFSA and RSP contributions to top up some smaller positions on share price weakness (CNR, BCE, BPY, and CMG.to). Probably won’t do much more buying for a few months.

  7. I actually really like these kinds of posts Tawcan! Don’t give up on them!

    I find that most “stock analysis” websites write way too much about the “big US” companies and too little about international or Canadian companies. Your perspective is different, and I like that.

    Even though we invest primarily in the U.S., I still like and occasionally invest in Canadian companies. They’re often very good!


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