Yahoo Finance Secure Your Future: Top Dividend-paying Stocks for 2023
Written by Brian Paradza, CFA at The Motley Fool Canada
Dividend stocks paying high yields north of 7% usually seem very attractive. However, their stock prices may seldom outperform the broader stock market. Juicy yields usually compensate for higher business and cash flow risks. Resultantly, the high dividend payouts may not be as safe as they should be for investors who intend to secure their financial future and live off portfolio dividends during a lengthy retirement.
Nonetheless, these stocks paying yields above 4% are worth a look. Top Canadian dividend-paying stocks including Canadian Natural Resources (TSX:CNQ) and a rallying Cascades Inc. (TSX:CAS) stock could pay growing and reliable dividends far into the future. Dividend growth on CNQ stock could raise the yield (on a cost basis) to juicier levels over time. While Cascades’ improving operating performance could richly reward dividend stock investors in the future – even though households aren’t hoarding tissue paper anymore.
Future total returns on Cascades and CNQ stock should be more than okay. Let’s have a look.
Canadian Natural Resources stock
Canadian Natural Resources is a top dividend-paying energy stock that delivers top-class capital gains during oil booms. Notably, it offered reliable income during recent recessions. CNQ stock has been a best-in-class energy stock to play an oil upside historically, and the $88.3 billion dividend payer could be a top dividend growth stock of the future – if oil prices cooperate.
Following 23 consecutive years of dividend growth, the company’s $0.90 per share quarterly dividend yields 4.5% annually, at today’s CNQ stock price of around $80.90 per share. Canadian National Resources is set to substantially grow its quarterly dividends, and return billions of dollars to shareholders in the near future due to a recent capital allocation policy change.
CNQ stock investors stand to receive 100% of the company’s free cash flow as early as 2024. Management plans to return all excess capital to investors once the company’s net debt breaches the $10 billion mark. The key trigger point is in close view now that net debt reached $11.9 billion by March 31, 2023. I’d be keen to watch net-debt figures in upcoming quarterly earnings reports.
Oil prices are cooperating so CNQ stock investors could receive cash bounties soon. Oil prices were seen holding around US$81 per barrel at the West Texas Intermediate (WTI) benchmark at the time of writing. The company can sustain dividends at oil prices in the US$40s.
CNQ stock is fairly valued at a price-to-free cash flow multiple of 7.1, which is below the industry multiple of 8.2.
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High-flying Cascades stock
Cascades is one of the top-performing TSX dividend stocks in Canada so far this year, and its fine run could only be getting started. Cascades stock has delivered a 46.2% total return to investors year to date. Income-oriented investors should still find its 4% dividend yield attractive. However, high potential capital gains could be ahead as the company executes its 2022-2024 strategic plan, securing investors’ financial future.
The $1.2 billion tissue maker and packaging materials production giant could grow earnings at triple-digit rates in 2022, and deliver better operating results through 2024. Cascades’ operating income is growing due to higher pricing in all segments, and sales volume growth in its containerboard and specialty products segments. The company commenced production at its brand new (and second largest) Bear Island production plant in May 2023 and production is ramping up.
Cascades’ new production plant modernizes the company’s assets, improves operating efficiency, and may help the company win more business in a steadily growing ecommerce products packaging vertical. It is a modern and competitive asset that gives Cascades a long-term competitive edge in its market verticals and potentially grows market share.
Most noteworthy, the company uses recycled materials as production inputs, earning it top ESG ratings from rating agencies including MSCI. High ESG ratings may secure CAS stock’s place in ESG-sensitive portfolios of the future.
Bay Street analysts project a strong recovery in Cascades’ earnings for 2023 to $1.05 per share, up from a $0.34 per share loss last year. Management sees no change to the company’s dividend policy through 2024.
Despite a fine run so far in 2023, Cascades stock trades cheaply at a price-to-sales multiple of 0.3, which is far below the industry average multiple of 0.9
The post Secure Your Future: Top Dividend-paying Stocks for 2023 appeared first on The Motley Fool Canada.
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Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.
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