There are some stocks that offer dividend yields of more than 5% with the likelihood of further increases over the next five years plus capital gains potential, suggests Gordon Pape, Canadian stock specialist and editor of The Income Investor.

These three are sound, Canada-based companies that should ride out any market downturn and will likely be trading at higher levels in five years than they are today.

These stocks have an average yield of about 5.8% and over a five-year period, each of these companies are expected to raise their dividends at least once a year. There are no guarantees in the world of investing, but on balance I think these securities offer good potential with comparatively small risk.

BCE (BCE) is Canada’s telecom company and is a must-have stock in any income portfolio. The shares yield a healthy 5.8% and the company has a long history of annual increases (this year’s increase was 5.1%). The stock has a beta of 0.38%. The chart shows a long but steady upward trend over many years, without significant volatility.

Second quarter results showed a 2.9% increase in operating revenue to $5.9 billion, from $5.7 billion the year before. Adjusted net earnings were ahead of expectations at $791 million ($0.87 per share).

That was ahead 5.3% from $751 million ($0.83 per share) in the prior year. Free cash flow was $1.3 billion, up 7.1% from $1.2 billion in the same period of 2021. The company reaffirmed its projection that earnings per share will grow at between 2-7% this year.

TC Energy (TRP) owns and operates 93,300 km of natural gas pipelines and 653 billion cubic feet of storage in Canada, the US, and Mexico. It also has a 4,900 km network of oil pipelines, which supply Alberta crude to the US market. As well, it invests in a number of power generation facilities, including wind, solar, and nuclear.

The current quarterly dividend is $0.90 per share ($3.60 a year), for a yield of 5.7%. The company has raised its payout every year since the turn of the century. The stock has a beta of 0.78 and a p/e ratio of 19.8.

Second quarter results came in slightly ahead of analysts’ expectations. Net income attributable to shareholder was $889 million ($0.90 per share) compared to $975 million ($1 per share) in the same period of 2021.

For the first six months of the fiscal year, net income was $1.247 billion ($1.27 a share). In the same period of the prior year, the company reported a loss of $82 million (-$0.08 per share).

Subsequent to the release of results, the company announced a bought deal for 28.4 million common shares at a price of $63.50 per share. The proceeds will be used to assist in the financing of the the Southeast Gateway Pipeline, a US$4.5 billion, 1.3 billion cubic feet per day, 715-kilometre offshore natural gas pipeline in the southeast region of Mexico.

Bank of Nova Scotia (BNS) — known as Scotiabank — is the third largest among Canada’s Big Five banks in terms of market cap. It is the most internationally oriented of the banks, with significant assets in Latin America.

The bank recently increased its dividend for the second time in the past 12 months, a 3% hike to $1.03 per quarter. That brought the yield up to 5.25%, the highest among the country’s major banks.

BNS has raised its dividend at least once in every year since 2011, except in 2020 when the Office of the Superintendent of Financial Institutions ordered all financial institutions to freeze their payouts. The stock has a beta of 0.89 and trades at a p/e ratio of 9.5.

Although bank stocks have taken a dip this year, BNS reported strong second quarter results. Net income attributable to shareholders was $2.7 billion ($2.16 a diluted share), up from $2.4 billion ($1.88 a share) the year before. Total revenue was $7.9 billion compared to $7.7 billion in the prior year.

For the first six months of the fiscal year, BNS reported revenue of just under $16 billion, compared to $15.8 billion last year. Net income was $5.3 billion ($4.30 per share), up from $4.7 billion ($3.74 per share) in the prior year.

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