Top 10 Canadian Dividend Stocks

The Dow Jones Canada Select Dividend Index represents 30 of the top dividend stocks in Canada. These stocks are selected to the index annually based on yield.

The index is up 29.04% year-to-date as of July 31,2009 with dividends reinvested. Last year the index was down about 31%.The 10-year annualized return is 10.62%. One of the interesting features of this DJ Canada Select Dividend Index is that about 73% of the index is made up of financials.Telecom, utilities and energy form about 7% each.

The Top 10 Components in the Index are:
National Bank of Canada
Bank of Montreal (BMO)
Canadian Imperial Bank of Commerce (CM)
Toronto-Dominion Bank (TD)
IGM Financial Inc.
Bank of Nova Scotia (BNS)
Royal Bank of Canada (RY)
Manitoba Telecom Services Inc.
TMX Group Inc.
Sun Life Financial Inc (SLF)

The only utility in the above list is telecom provider Manitoba Telecom Services Inc whose stock does not trade in the US markets. Among the financials all the large banks are in the list with one life insurance company. SunLife Financial (SLF) has a dividend of 4.43%.The five largest Canadian banks weathered the credit crisis well and have shown their strength with a strong rebound since the March lows. Their dividends range from 3.69% to 5.62%. One of the biggest advantage with holding the Canadian bank stocks is that due to strict regulation and highly conservative business practices, they produce consistent profits year after year. Some even call these banks the “cash cows” of Canadian stocks due to their dividend payments.

Another point is that these banks and insurance companies such as Manulife, Sun Life, etc. are in many of the mutual fund portfolios held by Canadian thru their 401-K equivalent for retirement savings called the RRSP account.

While its true that these banks took some unwanted risk thru the use of derivatives in recent years they have written most of the losses.Unlike the US, the housing market in Canada is relatively holding up well and consumer debts such as credit card debt is not a huge problem due to strict underwriting standards. None of the banks in Canada are in serious risk of collapse like some of the large US banks.

Disclosure: Long all five banks

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