The good news, however, is that the equity sector today looks soft and balanced in terms of both yield and value, which could position Canadian equity investors for gains in 2024. And with three rate cuts by the Bank of Canada since June. signaling an inflection point in interest rates, equity stocks are set to outperform in the coming months.
Dividend stock performance in Canada
A few years ago, you could count on your hands a number of Canadian large caps paying a 5% dividend. Today, that level seems normal. The forward yield on the S&P/TSX Composite Index is 3.3%. That accounts for another 240 stocks, some of which pay no dividends at all. Just think of the fees if you decide to be careful. With rising bond yields hot on their heels, the 176 dividend-payers in the S&P/TSX Composite Index have an average yield of 3.82%. MoneySense Top 100 dividend stocks in Canada yield 3.16% on an equal weight basis.
That means a few things.
First, it's going to take another year of 3% loss-plus investors to post a negative return this year.
Second, if—as seems to be the market consensus—interest rates are high and central banks will continue to cut rates, bond yields should fall further and the stock risk premium will look more attractive. This could be a signal to conservative investors to put some money back into equity stocks, ultimately supporting their prices.
Using the best dividend stocks approach not only for their yield but also for stability and valuation, we have also identified the 100 best dividend stocks in Canada. We then whittled that list down to create the A-Team and B-Team, each containing 10 dividend all-stars. This year's IA-Team is very active in the fields of goods and energy. It includes two non-utility providers: insurer and asset manager IA Financial Corp. and technology stock Enghouse Systems.
How Canadian equity stocks have performed
What's apparent at first glance is the absence of what usually comes to mind in terms of equities: banks, utilities, telecoms, pipelines, and real estate investment trusts (REITs).
“Finances haven't been good,” said Aman Raina, an investment coach and founder of Sage Investors, which compiled the 2024 list of top equities. Where they fail is in the math especially in the profit margins.
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