If you look at our dividend portfolio, you’ll see that we own over 50 individual dividend stocks and one index ETF. I will be the first one to admit that we probably own a few too many individual dividend stocks. Therefore, I plan to reduce that number to something around 40 to 45 over the next few years.
Since we add new cash each year to purchase more dividend paying stocks and index ETFs, my current plan is to add more shares to our existing holdings, rather than initiate new positions (unless there are extremely attractive names with good stock prices I can’t ignore).
With that in mind, here are 6 stocks I plan to buy more of in 2022 and my reasons.
6 stocks I plan to buy more of in 2022
Please note, I’m not a financial professional so whatever I write on this blog is purely my opinions and not advice/recommendation. Please always do your own research and buying and selling decisions. Thank you.
1. Enbridge (ENB.TO)
I have been building our Enbridge position over the last number of years. A few years ago, we purchased a lot of Enbridge shares when the stock price was below $40 thinking the stock price would move up over time.
So far these purchases have paid off for us, resulting in a nice paper gain.
Why am I considering buying more Enbridge shares now that the stock price is over $50 and seemingly expensive to some investors?
First, due to environmental concerns, it is getting harder and harder to build new pipelines. For example, the Keystone XL pipeline project was cancelled as a result of environmental concerns. Since it is nearly impossible to build new pipelines, existing pipeline infrastructure has become more valuable than ever. It shouldn’t surprise anyone that Enbridge’s existing 5,000 km pipeline system is now worth more than it was five years ago.
Second, we North Americans rely heavily on natural gas and oil in our everyday lives. Cleaner, non-fossil fuels are slowly shifting our reliance on natural gas and oil but I don’t see us going away completely from natural gas and oil in the next 10 to 15 years.
Some of the inability to shift away completely from fossil fuels is because of technical reasons. Here in Canada, more houses are using heat pumps as the prime heating source. Since heat pumps are most efficient at above 4 degrees Celsius, many of these houses use natural gas furnaces for backup. Furthermore, in most parts of Canada when the average temperature in the fall and winter is consistently below 4 degrees Celsius, heat pumps aren’t the best tool for heating, so Canadians will continue to rely on natural gas-powered furnaces.
Finally, Enbridge pays a healthy 6% yield. Based on my research using free cash flow, Enbridge should be able to continue to pay its juicy dividends. Even if Enbridge only raises dividend payout between 1% to 5% each year, the dividend income should continue to outpace lower yield high growth dividend stocks for many years.
2. Canadian National Railway (CNR.TO)
Like Enbridge, we have been slowly building up our position in Canadian National Railway over the years. What was one of the key topics that people keep talking about during this global pandemic?
Supply chain issues.
Remember people hoarding toilet paper at the beginning of the pandemic then recently hoarding eggs, beef, and poultry during the BC floods?
People tend to get a bit crazy when there’s a supply chain issue on products they rely on a daily basis…
Although airplanes are readily available to move people, many goods are still being transported via rail in North America. Why? Because rail remains to be one of the best, most cost-efficient ways to move goods around North America. This trend is not going away soon and Canadian National Railway will benefit from it.
Despite CNR’s low yield of around 1.5%, it has a ten-year dividend growth rate of 14.2% and a five-year dividend growth rate of 10.4%. Most importantly, the stock price has appreciated over 60% in the last five years.
A boring yet highly profitable company that pays stable and growing dividends? Sign me up!
3. Algonquin Power & Utilities (AQN)
Although I just wrote about our dependence on fossil fuels when it comes to Enbridge, Mrs. T and I continue to like renewable energy as we think renewable energy is the future. For the sake of our kids, their kids, and all future generations, we need to change our energy strategy and shift our reliance on fossil fuels to renewable energy. I truly believe this is absolutely vital for the continuation of humankind and Earth.
As of December 2021, Algonquin owns and operates ~4.1 GW renewable assets and has many different renewable projects in the pipeline to increase its renewable capacities. For example, the Altavista and other solar projects will add 196 MW and the Maverick Creek, Blue Hill, Deerfield II and other wind generation projects will add another 999 MW to Algonquin’s portfolio.
There are a lot of potential future growths with Algonquin. Given the stock price has taken a beating in the last year, we plan to take advantage of the discounted price and build up a holding with sizable AQN shares.
Given the juicy +4.5% yield, we can collect dividends from Algonquin and wait for the stock price to appreciate. This certainly beats holding a stock that doesn’t pay any dividends.
4. SmartCentres REIT (SRU.UN)
For many years, people believed online retailers would take over and brick-and-mortar stores would cease to exist. Sure, consumers have been ordering products through online retailers like Amazon regularly. However, brick-and-mortar retailers like Walmart, Target, Costco, and Home Depot have learned to adapt and change their business model and strategy in the fast changing market.
Throughout this global pandemic, people have again doubted these brick-and-mortar stores. Lockdowns and restrictions have prevented people from accessing shopping malls and brick-and-mortar retailers.
For real estate investment trusts like SmartCentres REIT, rent collection level became a big topic. Most investors were concerned whether these retail REITs can continue collecting rents from their tenants. These concerns sent the retail REIT sector into a downward spiral. Some retail REITs had to cut dividends. Fortunately, SmartCentres REIT continued paying dividends despite all the turmoil and uncertainties.
Mrs. T and I don’t frequent shopping malls but whenever we visited shopping malls throughout the pandemic, we found lots of people in them. This gave me a key realization – for many people, shopping malls are the place for their social interaction. They meet up with friends for coffee or food in shopping malls. Some people like to be surrounded by people so they head to shopping malls regularly to meet that need.
There are a few things I particularly like about SmartCentres REIT. One, SRU.UN has 168 properties across Canada and 73% of these properties are anchored by Walmart. Walmart typically does not close stores once they are opened; Walmart also spends a lot of money each year to improve the look and feel of their retail stores. In other words, Walmart is a great tenant to have.
Another thing to like about SmartCentres REIT is that the cash receipts have returned to the historically normal level. Early on in the pandemic, the cash collection dipped to as low as 86% but it has since returned to around its normal range of around 97%.
SRU.UN also has 54 projects completed, 84 active projects, and 153 future projects which should unlock $3.7 billion of potential value to shareholders.
We plan to continue to add SRU.UN in our TFSAs for tax efficiency reasons.
5. Apple (AAPL)
Recently, Apple became the first US company to cross the 3 trillion dollar market cap and I believe the company will continue to grow.
Apple has become a profit-generating empire by creating a tightly integrated ecosystem. Once you buy into the Apple ecosystem, it becomes increasingly more and more difficult to leave this ecosystem the more Apple products you own.
It is expected that Apple will announce new products this year – a high-end 27 inch iMac, a new Mac Pro desktop, a revamped MacBook Air, an updated Mac mini, new Apple Watches, new iPhones, new AirPods Pro, and possibly other new products like a new external display and an augmented reality headset. All these new products will trigger existing customers to either upgrade their Apple products or entice new customers to switch from Apple’s competitors, generating more venues for Apple.
Apple has never been the “first” to create a new product but it has a long history of innovating and improving existing products and making them better. Just take a look at iPhone and iPad. It’s hard to believe that it has been 15 years since Steve Jobs announced the iPhone. Who knows, maybe Apple will enter the electric car space in a few years, announce its “next” revolutionary product series and start the next chapter of the company.
I’m convinced that Apple will continue to thrive and so I plan to add more Apple shares in 2022.
Ok, XAW technically isn’t stock but I’ve decided to include it on this list.
Since XAW holds more than 9,000 international stocks with more than 60% exposure in the US, 6% exposure in Japan, 4% exposure in the UK, and 3% exposure in China, it is an excellent ETF to hold for international exposure and sector diversification.
We plan to add more XAW in 2022 in our RRSPs and non-registered accounts and take advantage of the commission-free ETF purchase that Questrade offers.
Summary – 6 stocks I plan to buy more of in 2022
There you have it, six stocks (five stocks, one ETF) that I plan to buy more of in 2022. We plan to buy these stocks across all three of our accounts – TFSA, RRSP, and non-registered.
However, with tax efficiency in mind, we will only purchase REITs in either our TFSAs or RRSPs; we will only purchase US stocks like Apple in our RRSPs to avoid the 15% withholding tax on dividends.
What will happen in 2022? Will 2022 give us yet another great year of return? Will the market finally crash from its all-time highs this year?
Well, I have no idea. Your guess is as good as mine. But I know one thing for sure – time in the market is far more important than timing the market.
So keep increasing your savings gap and invest the difference.