The best income stocks should offer what is known in football as a triple threat.
First, they must provide steady and dependable cash flow with a decent yield (minimum 3 per cent).
Second, the company should be committed to regular dividend increases.
Third, the stock should have capital gains potential.
When all three combine, the results can be impressive. Here are the top total return performers for 2024, chosen from securities on the recommended lists of my Income Investor and Internet Wealth Builder newsletters that trade on the TSX. Returns are to Dec. 20.
Capital Power Corp. The utilities sector staged a major turnaround in 2024, fueled by the rapid decline in interest rates in the second half of the year. CPX was one of the best performers, with the shares rising $25.31, or about 67 per cent. The Edmonton-based utility has increased its dividend five times since 2020 and now pays 65 cents a quarter ($2.60 a year) to yield 4.1 per cent. The total return year-to-date has been $27.91, or 73.8 per cent.
Manulife Financial Corp. Canada’s biggest insurer has always been a steady divided payer, but it was precluded from increasing its payout during the pandemic along with all other financial institutions. It’s made up for that since, increasing the dividend by 18 per cent in late 2021, 12 per cent in 2022, and 8 per cent in 2024, to its current level of 40 cents per quarter for a yield of 3.7 per cent. The stock has gained $14.25 a share this year. Add the dividend to that and our profit for 2024 is $15.85 per share, or 54.1 per cent, based on the Dec. 29, 2023, closing price.
Canadian Imperial Bank of Commerce . It was a good year for banks, with several of the Big Six posting impressive total returns. CIBC was one of the best performers, with the stock rising 45 per cent, to $92.50. The bank has increased its dividend five times since the freeze was lifted in the fall of 2021 and now pays 90 cents per quarter ($3.60 a year) to yield 3.9 per cent. Combined with a capital gain of $28.70 on the share price, the total return for 2024 is 50.6 per cent.
Keyera Corp. Keyerahas steadily raised its dividend over time. The latest bump was a hike of 4 per cent, to 52 cents per quarter, effective with the September payment. The shares benefitted from the continued strong performance in the energy sector to gain $12.41 for the year, or 40.8 per cent. Factor in dividend payments of $2.04 and the total return is 47.5 per cent.
TC Energy Corp. It’s been a good year for pipeline companies and falling interest rates were a bonus. TRP stock is up $18.41 for the year, a gain of 38.9 per cent. We will have received $3.52 in dividends by the end of the month for a total return of 46.3 per cent.
Obviously, we shouldn’t expect a repeat of this in 2025. All these stocks benefited from the decline in interest rates. But the underlying strategy is sound. When choosing an income stock, don’t focus exclusively on the current yield. Do some research to see how the stock has performed on a total return basis over time.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.