Best Dividend Stocks Canada

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The pandemic and all the disruptions experienced by people have led to several systemic and secular changes. Like work-from-home has changed the corporate and business world significantly, the pandemic has also brought personal finance to the forefront. Many people have been forced to rethink their finances and have learned the importance of saving the hard way. Dividend-paying stocks are among the most popular options for investors looking to generate passive income and grow their savings.

You can also check out the best monthly dividend stock in Canada for regular distributions.

What are Dividend Paying Stocks?

Dividend-paying equities are stocks of companies that pay part of their income out as cash to their shareholders. Companies choose to pay excess cash to their shareholders if they feel they don’t need it or cannot generate a meaningful return. A company paying a dividend is viewed as a positive sign as shareholders get a passive income. In addition, it signals that the company is generating more returns than it needs to grow.

Dividend-paying companies have been attractive to investors for an extended period of time. These stocks are typical in sectors like power/utility, steel, cement, FMCG, REITs (Real Estate Investment Trust), and pharmaceuticals. These sectors have stable demand, and companies mature in their life cycles with little capital to fuel growth. In addition, over the past decade, large technology conglomerates such as Apple have also started paying dividends due to high cash flows or excess capital.

Best Canadian Dividend Stocks to Buy

Let’s take a look at some companies that are great at paying dividends. These companies are usually only found on the TSX and feature blue-chip companies across Canada. Furthermore, we have highlighted some growth stocks, stocks with the most stable dividends, and the highest paying dividend stocks below. Finally, we have evaluated these stocks based on annual dividends, so do your research to find the ideal times to invest with ex-dividend dates.

High Growth – Algonquin Power and Utilities (TSX: AQN)

Algonquin Power and Utilities is a Canadian renewable energy and utility conglomerate. The company operates assets throughout North America. Its asset portfolio contains wind farms, solar farms, hydroelectric plants, water plants, natural gas energy plants, and power distribution/transmission. The company is very stable as 80+% of its revenue comes from regulated assets (sole provider of essential services in an area), thus making it very attractive for dividend investors.

The company owns about $17.4 in assets in its portfolio. In addition, the company plans to invest another $9.4 billion of assets by 2025, of which $6.3 billion will be in the regulated business, meaning that the stable earnings will continue to grow.

In Q1, the company reported earnings of $634 million (up 34% YoY), EBITDA of $289 million (17% YoY), and a net profit of $124 million (up 21%). In addition, in light of the stellar performance, the company announced a 10% dividend increase.

Algonquin offers an excellent dividend yield of 4.4%, a payout ratio of 40%, and has grown dividends by 10% annually over the past five years. Therefore, it ticks all boxes of an outstanding dividend stock. If you are looking for utilities and dividends, look no further than utilities ETFs with dividends.

Most Stable Dividend Stock – Fortis (TSX: FTS)

Fortis is a Canadian natural gas and power company. The company has gas transmission and power assets throughout North America. Most of the company’s assets are in regulated space, meaning revenue is stable.

The company has British Columbia, Arizona, Alberta, Newfoundland, New York, Ontario, the Caribbean, and Prince Edward Island. Given Canada’s inhospitable climate, the company has a very stable demand due to natural gas for cooking and heating.

In Q1, Fortis reported revenues of $355 million, $0.76 per share (up 15 % YoY). However, Fortis’ favour’s real clincher is its extraordinary dividend history. The company has a dividend payment and growth history of 47 years. Fortis ‘ dividend’s average annual growth rate is 6% and offers a dividend yield of 3.6%. Fortis’ payout ratio is 73%. The company has forecast dividend growth of 6% till FY25.

Considering the stable nature of its business and its splendid dividend history, Fortis makes an excellent option for stable dividend seekers or for people looking for the best DRIP stocks Canada has

Highest Yield Dividend – Enbridge (TSX: ENB)

Enbridge is a Calgary-headquartered multinational pipeline company. The largest liquid hydrocarbon transportation company with over 5000 miles of pipelines throughout North America. The company is also a significant player in the natural gas transportation business, with a 20% market share in the United States. In addition, the company transports 40% of all crude oil imports in the US. Enbridge is financially very strong, with over $100 billion in market capitalization.

Due to regulatory and political hurdles in setting up an oil pipeline, the company benefits from high barriers to entry, which is very good for dividend investors and shareholders in general.

The company has a project pipeline of $17 billion. Enbridge has plans to enter renewable energy with a $4 billion investment after the current project pipeline is complete. The company will benefit from operating leverage as the energy sector rebounds from its COVID slump.

In Q1, the company reported EBITDA of $3.7 billion, down 2.6% YoY, and net earnings of $1.9 billion compared to a loss of $1.4 billion in Q1 2020. Enbridge has given full-year guidance of $13.9 billion to $14.3 billion. Enbridge has a very strong dividend history owing to stable demand for oil/gas and high barriers to entry to its business. As a result, Enbridge offers a high dividend yield of 6.75% and has grown dividends at a rate of 10% annually over the past 25 years.

Top Bank Dividend – Canada National Bank (TSX: NA)

Bank Stock in Canada are great dividend payers. NA.TO is a great option.

Canada National is a Quebec-headquartered bank. Canada National is the country’s sixth-largest bank in terms of market share. However, the banking sector has had a tough year due to COVID raising concerns over asset quality. As a result, the bank was forced to create large loan-loss reserves. Fortunately, the outcome was much better than expected, and banking sector shares rebounded as reserves reversed. As a result, the bank’s stock is up 38% YTD and is currently trading at C$93.

The bank is particularly well-placed due to its focus on capital markets and wealth management. Since the initial shock of the pandemic, the stock market has been booming due to inflation, rate cuts, excess liquidity, and cheap debt. The bank will also benefit from the pandemic highlighting the importance of prudent wealth management.

In Q1, the bank outperformed analyst projections with revenues of $761 million (up 25% YoY) and EPS of $2.15 (up 29% YoY). Canada National has a dividend yield of 3.03%. The bank has been paying dividends consistently over the past ten years, with an annual growth of 8.5% over the period. In the first quarter, the bank has a payout ratio of 41.4%.

Toronto Dominion Bank (TSX: TD)

Toronto Dominion Bank is the second-largest bank in Canada. The bank has about $1.73 trillion in assets. Toronto Dominion also has a significant presence in the US in 16 states and assets of $351 billion. In addition, the bank has announced plans to grow through acquisitions in the US.

Wonder why Canadian bank stocks are falling? Like Canada National, Toronto Dominion has weighed down COVID-related provisions, and its shares have heavily rebounded by going up 28% YTD. The bank is exceptionally cash-rich, making it a safe choice for investors. The bank recently reported stellar results for the first half of FY21 with a net income of $7.15 billion, up 43% YoY. Over the past five years, the company has delivered EPS growth of 12% and share price growth of 10%

The bank is a favourite of dividend investors as it has a history of continually paying dividends since 1857. Since 1996, the bank has grown dividends at a rate of 11%. As a result, the bank currently has a dividend yield of 3.69% and has a dividend payout ratio of 40%.

Why You Should Consider Investing in Dividend Stocks in Canada

Dividend stocks are attractive to investors looking for passive income streams. Dividend stocks help investors benefit from capital gains and a steady income stream. Another advantage of dividend stocks is that they give investors a choice of what they want to do with their returns; instead of keeping or spending the dividends they receive, investors can reinvest the dividend in the same stock for compounding or investing in other assets. In non-dividend stocks, investors are forced to liquidate holdings if they want access to their returns.

Dividend stocks have become particularly attractive to passive income seekers as, over the past decade, interest rates have fallen dramatically and have lagged inflation. Since the crash of 2008, governments were forced to cut interest rates to all-time lows to prop up their economies. The resulting excess liquidity and cheap debt put the global economy in an inflationary period. In such an environment, sticking to traditional bank deposits or government bonds is an extremely poor financial decision as inflation will continually erode a saver’s purchasing power.

The low-interest-rate environment has helped markets as more money is pumped into equities, thus leading to investors’ capital appreciation. A well-crafted portfolio of dividend stocks can result in a great return on capital and a steady passive income stream, especially as the impact of COVID has pushed us into a low-rate environment for at least the next few years.

Dividend-paying stocks are more tax-efficient than non-dividend stocks as dividends are taxed at lower rates than interest income. For example, taxpayers in the highest bracket are just 29% on dividends in Canada, while interest income in the same bracket is taxed at 50%.

How to Evaluate Dividend Stocks –

Dividend investing is a complex process as a company that is paying dividends now might be able to pay them in the future or decrease them, which will lead to a drop in its stock price and destruction of wealth. Therefore, investors should carefully examine a company’s fundamentals to ensure that it will consistently generate excess cash to pay its investors. These are some of the key metrics investors should examine before investing in a dividend-paying stock:

  1. Dividend Yield – The most basic barometer of a dividend-paying stock is its dividend yield. The dividend yield is the annual dividends paid out divided by the company’s stock price. Its calculation is similar to interest rates, but instead of capital, we use stock price, and instead of interest earned, we use annual dividend paid. Investors should be varied as a higher than usual dividend yield doesn’t necessarily mean a good investment. Investors should make sure they understand the reason behind higher-than-usual or above-average dividend yields.
  2. Payout Ratio – The Payout Ratio is the ratio of earnings paid out as dividends to a company’s total earnings or dividend per share divided by earnings per share. The payout ratio could explain the safety of a company’s dividend and its growth prospects. On the other hand, a very high payout ratio might be risky as it means that dividends consume most of the company’s profits. As a result, any disruption or slump in its business could lead to a reduction or a halting of dividends. A general rule-of-thumb is that investors should prefer stocks with payout ratios less than 60% but ones with growing dividend payout ratios as they demonstrate earnings growth.
  3. Free Cash Flow – Financial Accounting techniques are very complex, and fundamental understanding is vital to understand a company properly. For example, an inexperienced investor might think that a company’s net profit is the cash it generates. However, net profit includes non-cash items such as depreciation and amortization. Free Cash Flow is the cash a company generates from its activities and is found in the cash-flow statement, not the income statement. A company that consistently generates high free cash flow will grow, service its debt and pay investors dividends. A low FCF company is a big red flag for dividend investors.
  4. Price-to-Earnings Ratio – The PE ratio is investors’ most popular valuation metric. It is the ratio of price per share to earnings per share. It is generally used for comparative valuation, i.e., how expensive a stock is compared to peers.
  5. Return on Invested Capital – ROIC is a company’s return on its investments. A company invests capital in building return-generating assets. For example, the capital might come from its equity or debt. A company that produces a high return on invested capital has a higher chance of maintaining and growing dividends.
  6. Net Debt Ratio – The ratio of Net debt (Debt – Cash on hand) to the company’s total capital. A company with high debt is risky as any shortfall in earnings could reduce or stop dividends because debt obligations take precedence over dividends. Therefore, investors should vary net-debt ratios of over 50%.
  7. Total Shareholder Return/ Capital Gains – While dividend investors mainly focus on dividend income, the total return from holding an investment/capital gains is crucial as dividend yield alone is not enough to build wealth. Investors ensure that the company has solid management, resilient business models, and growth headroom so that their investment grows over time.

Different Types of Dividend Stocks –

Likes equities are divided into types like value and growth. There are different types of dividend stock themes that are popular among investors –

  1. High Yield Dividend Stocks – Stocks with dividends that outperform significant benchmarks. These benchmarks could be equity indexes or government-issued bonds.
  2. Growth Dividend Stocks – These stocks have histories of growing their dividends over time. Growth dividend stocks are top-rated among investors as they signal a growing business and deliver gains through stock price appreciation and dividend growth.
  3. Stability Dividend Stocks – These stocks have low growth prospects or plans but have very resilient business models with steady demand making them long-term investment stocks. Stocks in this category generally manufacture products or provide essential services, e.g. power or utility companies.

Risks to Consider When Building a Dividend Portfolio

While dividend stocks come with many advantages, some risks should be considered when investing in them. A common risk to consider is the yield trap. A higher than average or unusually high yield could be temporary due to a drop in stock price, high one-time dividends due to unusual transactions such as an asset sale, or temporary high dividends due to better-than-average performance.

Investors should also consider interest rate risk. A rise in interest rates could make dividend stocks look less attractive to investors than risk-free bank deposits and government bonds, thus leading to a sell-off and, therefore, capital loss.

Lastly, an investor should thoroughly examine a company’s dividend history. A company that has been paying dividends consistently over a long period signals a resilient business and good management, while a company with an erratic or on-and-off dividend schedule signals cyclicality. Ideally, investors should look for companies with consistent dividend histories and gradual growth of dividends paid.


Dividend stocks are looking as attractive as ever due to the economic environment that we are in. Investors should pay attention to energy dividends stocks as the sector gradually rebounds from COVID. However, investors should carefully consider the risks involved with dividend stocks and carefully examine a company committing to an investment.

Top Dividend Stocks in Canada

Can you buy 3 of the Canadian dividend shares for under $50?

We’ve written about some of the best Canadian dividend shares you can buy and hold in your portfolio this year. We chose intact Financial as one of the main reasons is the excellent performance of the shares, which AQN has picked up as renewable energy becomes increasingly important.

Fortis is ranked as one of Canada’s leading dividend stocks due to its long dividend growth streak and consistently generates sustainable cash flow. BLV has the second-largest dividend in Canada, just about qualifying to be a leading dividend payer. To close this gap, retirees should invest in a company that can deliver long-term dividend growth, such as Fortis or Suncor Energy.

I’m a big fan of Canadian dividend stocks, so if you don’t have too much “Canadian home bias” in your investment portfolio, ensure your wealth distribution is still suitable. I believe that diversifying into the Canadian dividend stocks mentioned above and some of the lesser-known “Canadian dividend” stocks is a great strategy. If you are looking for stocks that increase dividends, you should use these and other metrics to value dividends. As part of a dividend security investment strategy, you want to fill your portfolio with stocks that pay high dividends.

However, do not place US dividend shares in your TFSA, keep them outside your TFSA-registered account, or you will lose 15% of US withholding tax on your dividends. I hold many Canadian dividend shares because taxes are better than low taxes, and taxes on “Canadian dividend companies” are favourable.

After all, investing in Canadian dividends – the distribution of shares – is limited to a country that accounts for only 3% of the global stock market. There is a wide range of dividend-paying stocks in the US, including dividend-paying companies such as Coca-Cola, PepsiCo and McDonald’s. In addition, many North American dividend stocks are significantly undervalued, which provides a unique buying opportunity for long-term investors, making this an ideal time for a dividend investment strategy.

I hope you find the Canadian Dividend All-Star List helpful in helping you with your dividend growth strategy. You can also track our quarterly dividend income to see if your dividend income continues to grow with the best dividend stocks in Canada.

If you want to take your dividend investment to the next level, Dividend Stocks Rock (DSR) is a highly recommended product. Invest in the best dividend shares in Canada and Canada and start building a bright financial future today.

The Toronto Stock Exchange has integrated Dividend Watch with thousands of Canadian dividend shares to be used as a dividend calculator and portfolio tracker. The following two sections look at some of the best dividend stocks in Canada and Canada’s leading dividend companies.

The other dividend ETFs (ZDV, CDZ, etc.) offer a comprehensive view of the highest-paying Canadian dividend stocks. Canadian companies that have increased their dividends for five or more calendar years in a row are the Canadian Dividend Stock Index (DGI) ETF (click the link). The Canadian company, which has increased its dividend for five consecutive years, is offering more. Welcome to the second part of the D Dividend Stock Rankings for Canada, compiled by Kyle Prevost. High-quality “Canadian dividend shares” have increased their dividend for five years in a row.

These five dividend stocks apart are their high dividend yield and dividend history of high quality. Dividend investors look for a dividend share. Dividend investors prefer stocks with a low dividend ratio and a history of raising dividends over the years, while they choose dividend stocks with the highest yield.

Indeed, some of the above-mentioned dividend stocks currently pay dividends that can support a dividend yield of at least 4.5%, and sometimes even higher.

Since Canada’s five largest banks have paid dividends continuously since the nineteenth century, it makes sense to invest in Canadian bankers who continue to pay hefty dividends regardless of market conditions. Canadian banks with the highest historical dividend yield, dividend investors can buy the stock and wait for a dividend increase. If the best Canadian dividend stocks are listed above, you can expect Royal Bank to increase its dividend until at least early 2022, owing to the global pandemic.

Fortis (TSX: FTS) has been a mainstay of our dividend share list for years, and Suncor Energy is a candidate in many ways. However, given the current climate of uncertainty, dividend security and reliability are the main reasons Fortis is the highest dividend stock in Canada.