Have you ever thought of buying a share, and then using its profits to buy another share? Well DRIP is basically that, the only difference being that you use the profits gained from a particular stock to purchase more stocks in the same company.
It might come off as a surprise to many new investors, but this sort of scheme is one of the most widely used plans and is called ‘DRIP’ or ‘Dividend Reinvestment Plan.’
A dividend reinvestment plan (DRIP) is a model that enables shareholders to reinvest their earned cash dividends on the dividend payment date into additional shares or partial shares of the underlying company. Although the word can allude to any automatic reinvestment plan set up through a stockbroker or investment institution, it often refers to a formal platform given to current shareholders by a publicly listed organization. Currently, around 650 corporations and 500 closed-end funds are doing so.
5 Canadian DRIP Stocks You Should Invest In
Here are five DRIP stocks for Canadian investors searching for long-term profitability and stability.
Bank of Montreal (TSX:BMO)
Bank of Montreal is a diversified North American financial services company and the eighth largest financial institution in North America by assets with four business segments: Canadian personal and commercial banking, US P&C banking, wealth management, and capital markets.
BMO provides a broad range of personal and commercial banking, wealth management, and investment banking products and services to more than 12 million customers and operates through three operating groups: Personal and Commercial Banking, BMO Wealth Management, and BMO Capital Markets, with total assets of $1.02 trillion as of January 31, 2022, and a team of diverse and highly engaged 43,863 employees.
BMO provides one of the highest dividend ratios in the industry. It pays a dividend yield of 3.936%, paying a quarterly dividend of 1.33 CAD per share. Currently, it has a P/E ratio of 10.40 and earnings per share of 13.01, making it an excellent investment option and most profitable Canadian dividend stock.
Enbridge Inc. (TSX:ENB)
Enbridge Inc. is a prominent provider of energy infrastructure in North America. Its primary businesses include Liquids Pipelines, which transports nearly 30% of the crude oil produced in North America; Gas Transmission and Midstream, which transports approximately 20% of the natural gas consumed in the United States; Gas Distribution and Storage, which serves roughly 3.9 million customers in Ontario and Quebec; and Renewable Power Generation, which owns estimated 1,766 MW (net) of renewable power generation capacity in North America and Europe.
Enridge had an EBITDA (earnings before interest, taxes, depreciation, and amortization) of $4.1 billion in Q1 2022, up from $3.7 billion in Q1 2021. While cash generated by running operations was $2.9 billion in Q1 2022, it was $2.6 billion in Q1 2021.
Currently, Enridge offers a dividend yield of 6.011%, considerably higher than the available competition, and pays a quarterly dividend payment of 0.86 CAD per share. Furthermore, 8,033,403 in trading volume with earnings per share of 2.87 make it a profitable long-term hold.
TransAlta Corporation (TSX:TA)
TransAlta is a Canadian independent electricity producer headquartered in Alberta. In Canada, the Western United States, and Australia, the firm has more than 70 power facilities. The net generating capacity of TransAlta is around two-thirds coal or natural gas-fired. The remaining one-third is made up mostly of hydropower facilities and wind farms.
The business is retiring Alberta coal units to meet carbon emissions laws and is moving towards renewable energy. TransAlta also trades and markets energy and owns natural gas transmission lines. With a market capitalization of 3,804,683,059, it is among the biggest dividend reinvestment program companies. Although the company does not offer any discounts, it has a high dividend yield of 1.452%. It has seen a consistent dividend increase in the past five years and currently pays a quarterly dividend of 0.05 CAD per share.
Despite the credit crisis of 2008, the company showed an increase in dividends, making it one of the best Canadian dividend stocks. Trading at a share price of $14.06 as of May 7, 2022, TransAlta presents an exceptional opportunity for high profits.
Bank of Nova Scotia (TSX:BNS)
Bank of Nova Scotia is a global provider of financial services. The bank’s operation is divided into five divisions: Canadian banking, International banking, Global wealth management, Global banking and markets, and Others. It provides a wide range of advice, products, and services, including personal and commercial banking, wealth management and private banking, and corporate and The bank’s overseas activities cover several nations, with a focus on Central and South America.
Scotiabank is a major financial institution in the Americas. With a workforce of around 90,000 people and assets of approximately $1.2 trillion (as of January 31, 2022 ), it holds a market capitalization of 98,727,977,943. Paying a quarterly dividend of 1.00 CAD per share and offering a dividend reinvestment plan, it is among the most profitable stocks with current earnings per share of 8.03.
Scotiabank offers a 2% discount and a minimum investment limit of $100. It has had strong dividend growth, with twice-yearly increases over the previous three years.
Emera Incorporated (TSX:EMA)
Emera Inc. is a regionally varied energy and services firm headquartered in Halifax, Nova Scotia, with roughly $34 billion in assets under management and more than $5.7 billion in sales in 2021. The firm mainly specializes in regulated electricity production and electricity and gas transmission and distribution with an emphasis on the transition from high carbon to low carbon energy sources. Emera has holdings in Canada, the United States, and four Caribbean nations.
Emera employs 7,140 people across the globe, holding a market capitalization of 16,342,790,145. The current dividend yield offered by the company is 4.267%, paying a quarterly dividend of 0.662 CAD per share. Furthermore, the P/E ratio of 30.70 and earnings per share of 1.99 add to the profitability of the stock.
This power production firm’s dividend is continuously raised, and the company has modest growth possibilities. Although the company pays relatively high dividends, it has a minimum investment limit of $25. It ranks amongst the highest paying Canadian dividend stocks, making it an excellent choice for long-term gains.
Why You Should Invest in DRIP Stocks in Canada
DRIP is the easiest method to gain substantial long-term benefits because of many reasons, some of which are elaborated below.
Dividends are often distributed to investors in the form of a cheque or a direct transfer into their local bank account. DRIPs allow shareholders to reinvest the portion of an announced payout into additional shares purchased directly from the firm. Because DRIP shares are often acquired from the company’s internal reserves, they are not tradeable on stock markets.
Shares must also be redeemed directly from the corporation, guaranteeing that the stocks you have bought are real and you are not being ripped off by any middle man. Neither does this have the uncertainty of a market collapse.
Most DRIPs allow investors to purchase shares commission-free or for a modest cost at a substantial discount to the current share price; dollar minimums may apply.
The Bottom Line
All in all, DRIP is a lucrative opportunity for investors to significantly increase their portfolios without having to physically invest and buy new shares. The compounding adds a multiplying factor to your profits while never sacrificing stability.
Canadian DRIP Stocks
Realty Income has increased its dividend by 4.7% per year since the IPO, and this rate of long-term growth should allow it to continue for the foreseeable future. But while stocks with relatively high yields, close to 5%, initially attract investors to stocks, the real power comes to those holding on to the long run: look for dividend stocks with a dividend yield of close to 4% and a dividend increase of 6% after at least five years of dividend increase (also known as the Canadian dividend aristocrat ).
Increasing the value of a stock portfolio while protecting it from adverse market movements means adding Canadian dividend stocks. For example, according to Wealth Professional Canada, Canadian bank stocks are considered one of the best dividend investing options due to their high yields and reliable payouts. With that in mind, here is a list of dividend stocks with characteristics such as powerful brands, a loyal customer base, and favourable demographic trends to look out for.
Dividend growth fans of the Million Dollar Journey have their list of Canada’s best dividend stocks which focuses on earnings per share and expects earnings per share as primary metrics for evaluating dividends. This is a compilation of several companies that increased their dividends for at least 25 consecutive years. This choice is based on overall growth, a combination of dividend growth and share price appreciation.
We’ve also included the number of hedge fundholders and the dividend yield for each stock added below based on their popularity among hedge funds as determined by the data collected by Insider Monkeys from approximately 866 hedge funds. If you are interested in more details, the Canada Dividend Verification Program provides much more data to help you make an investment decision.
Although it is easy to list Canada’s best-performing stocks and REITs, we believe that simply investing in the most mature dividend stocks is not the best long-term strategy for income-driven investors and other investors, so investing in Canada is The goal should be to pay as much as possible. Dividends, although as careful as possible. Unfortunately, many great companies don’t pay dividends long enough to be included in the index, although they can still make excellent long-term dividend investments.
The most popular places to start looking for these kinds of DRIP-friendly companies are dividend winners (dividend increases for ten consecutive years), dividend aristocrats (S&P 500 companies with dividend increases for more than 25 straight years) and King-wide dividends (considerable increase in dividends for 50+ years in a row ).
After years of investing and personal research on dividends, I have concluded that Dividend Stocks Rock is the best long-term method of valuing dividend stocks based on their dividend Triangle. Other factors such as dividend growth rate, earnings history, company’s earnings growth, stock performance and cash flow are also essential to monitor.
Some Canadian utilities, such as Fortis and Canadian Utilities, have paid dividends for over 40 years at an attractive dividend rate. Financial companies perform best in an environment of rising rates, so there may be more room for Royal Bank and other Canadian financial firms to continue paying dividends, whether it is a bull or a bear market. Canadian utilities have managed to increase their dividend payout for 48 straight years, the highest for any TSX company.
Its regulated interest rate business enables the company to generate stable cash flows and expand its cash-producing business base, supporting higher dividend payments. He works in the areas of Canadian banking (49% of the profit), international banks (36%) and global banks and markets (15%).
Now, this is one of our main promotions on Stocktrades Premium. With 85 investment properties worldwide and an increase in dividends since 2012, granite REIT is one of my candidates for the best dividend in Canada. In addition, Transcontinental has become one of my best Canadian dividends following a significant acquisition that shows Transcontinental wants to become a leading player in the packaging industry and an excellent 5.75% dividend yield.
Over the past 26 years of growth, Enbridge has increased its annual dividend on a shared basis by 10%, making it one of the best Canadian dividend stocks in this regard. Likewise, TC Energy increased its quarterly dividend by 7% to 87 Canadian cents per share in 2020. It raised its monthly dividend by 1 Canadian cent to 21 Canadian cents per year, or 2.52 Canadian dollars per share, up 6.8% from 2019.