We independently select all products and services. This article was written by a third-party company. If you click through links we provide, The Georgia Straight may earn a commission. Learn more

Top 15 Best Dividend Stocks in Canada for 2024

best dividend stocks in canada

Seasoned investors know that the topmost dividend yields don’t always equate to the top dividend stocks. While generally, dividend stocks offer higher yields, an increasing dividend yield could stem from a falling share price, which could point to problems with the underlying business. As the Canadian market provides many appealing dividend stocks, it’s crucial to contemplate all the variables when deciding on investments.

While there are other stable Canadian companies not included in the list of the 15 best dividend stocks in Canada, the ones listed below meet the criteria established by experts. Investors seeking stable and reliable dividend-paying companies may find the following list to be helpful in their investment decisions.

How We Picked the Best Canadian Dividend Stocks

When selecting the best Canadian dividend stocks, investors should consider several factors. One of the most critical factors is a company’s track record of raising dividends. Companies that have a history of raising dividends on a regular basis demonstrate the strength and growth of their business. Analysts keep a close eye on a company’s dividend policy, including the dividend payout ratio and whether dividends have been growing over time.

Aside from a company’s earnings growth and dividend policy, analysts also want to have a sense of a stock’s valuation. Even if a company has a history of raising dividends, investors want to know that there is still room for the share price to increase. One way to gauge valuation is to look at the stock’s trailing twelve months Price/Earnings Ratio (P/E ttm), which compares the company’s share price to its earnings per share over the last 12 months.

Valuation

Valuation is an essential factor when selecting the best Canadian dividend stocks. The following table takes into account the stock’s trailing twelve months Price/Earnings Ratio (P/E ttm), which compares the company’s share price to its earnings per share over the last 12 months. The lower the P/E ratio, the more undervalued the stock may be.

Company NameTickerP/E Ratio
Enbridge Inc.ENB.TO15.79
Canadian Natural Resources LimitedCNQ.TO9.71
Fortis Inc.FTS.TO20.66
TC Energy CorporationTRP.TO14.58
Algonquin Power & Utilities Corp.AQN.TO21.02
Canadian Utilities LimitedCU.TO17.33
Emera IncorporatedEMA.TO18.60
Pembina Pipeline CorporationPPL.TO12.14
Brookfield Renewable Partners L.P.BEP.UN.TO7.99
Brookfield Infrastructure Partners L.P.BIP.UN.TO21.40

A Word About Financial Services Stocks

The financial services sector is the most prominent sector in the Canadian stock market, comprising about 30% of the S&P/TSX Index. This sector includes Canada’s largest banks and insurance companies, which are among the country’s most solid companies. Not surprisingly, they also come with very attractive dividend yields. While banks and insurers are well represented in the list of Canadian dividend stocks, investors may want to consider diversifying their portfolios with other sectors.

In conclusion, when selecting the best Canadian dividend stocks, investors should consider a company’s track record for raising dividends, dividend policy, earnings growth, and valuation. By taking these factors into account, investors can make informed decisions when building a diversified portfolio of Canadian dividend stocks.

How to Invest in Dividend Stocks in Canada?

When investing in dividend stocks in Canada, the first step is to open a brokerage account. This will allow you to purchase a variety of shares, including dividend stocks. Here are three online brokerages that you may consider:

Qtrade

Qtrade offers exceptional customer service and a user-friendly interface, making it a great choice for all types of investors. It provides comprehensive research tools to assist you in making informed decisions about your dividend stock investments.

Questrade

Questrade offers competitive pricing and a wide range of account types, making it a flexible platform for different investment strategies. Its robust interface makes managing and diversifying your portfolio with dividend stocks more efficient.

National Bank Direct Brokerage

National Bank Direct Brokerage combines banking and investment services seamlessly, making it a great option for those who prefer the traditional banking environment and zero-commission trading. It provides extensive support and resources to guide you in selecting the right dividend stocks.

It is essential to compare the features and fees of different online brokerages before choosing the one that best suits your investment needs. By doing so, you can ensure that you are getting the best value for your investment.

The Best Dividend Stocks in Canada

Agnico Eagle Mines (AEM)

Agnico Eagle Mines is a large Canadian gold mining company with operations in the United States, Mexico, Finland, and Canada. The company has a strong track record of raising dividends over the last five years. In the coming months, AEM is set to consolidate several key acquisitions, which will lead to a significant increase in gold production. However, AEM’s share price has declined since the start of the year due to lower production guidance from management for 2023 and 2024.

Alimentation Couche-Tard (ATD)

Alimentation Couche-Tard is a convenience store operator that generates about 66% of its revenue from the United States, 21% from Europe and the rest of the world, and only 13% from Canada. ATD’s dividend growth has been solid in recent years, and earnings growth has led to a phenomenal appreciation in the share price. Fuel makes up 47% of ATD’s gross profit, but the company’s management has started to address the need for more charging stations across North America and Europe.

Bank of Montreal (BMO.TO)

Bank of Montreal is the first major bank on the list, with a well-diversified revenue mix of Canada Personal and Commercial (P&C) banking, U.S P&C, Capital Markets, and Wealth Management. BMO boasts the most impressive earnings growth over the past five years, and dividend growth has also been solid over the same period. BMO’s U.S. business is likely to be a driver of future growth, and the current dividend yield of just under 5.0% makes it an attractive long-term investment.

Canadian Natural Resources (CNQ)

Canadian Natural Resources is the only energy company on our list, with a long track record of raising its dividend. Both its earnings growth and its dividend growth in recent years are remarkable, given that it operates in such a highly cyclical sector. With the current environment of crude oil hovering around $70.00/barrel, CNQ is likely to see continued earnings growth, which in turn will allow the company to return those earnings back to shareholders by way of dividends.

Canadian Tire (CTC-A)

Canadian Tire’s Class A (non-voting) shares have an undemanding P/E ratio of 11.7 and a dividend yield of just over 4.0%. The company’s dividend growth rate of 17.6% places it among the better dividend growers. Canadian Tire has been able to diversify from its primary retail business, with investments in its online business paying off as it is now the second most visited online retailer in Canada.

Cogeco Communications (CCA)

Cogeco Communications is the only telecom services provider on this list, operating in two major segments, Canadian Broadband and American Broadband services. The shares currently offer an attractive dividend yield, and dividend growth has been more than respectable over the last five years. However, CCA’s remarkably low P/E ratio is likely due to the company’s high level of debt and rising interest expense. Some investors may see the decline in CCA’s share price over the last two years as a buying opportunity, while others may prefer to stick to dividend stocks with a more manageable level of debt.

Enghouse Systems (ENGH)

Enghouse Systems is an outlier on our list, with a market cap of only $1.8B. The company has a dividend yield of 2.71%, and its dividend growth rate of 18.13% over the last five years is impressive. Enghouse Systems operates in two main segments, Interactive Management Group and Asset Management Group, and provides enterprise software solutions to a variety of industries.

How to Evaluate Dividend Stocks?

When evaluating dividend stocks, investors need to look at various financial metrics to determine if a company is worth investing in or not. Here are some of the key metrics to consider:

Dividend Yield

Dividend yield is the percentage of a company’s stock price that is paid out as dividends. While a higher dividend yield is attractive, it is important to note that it is inversely related to the stock price. A falling stock price can lead to an increase in dividend yield. Therefore, investors need to evaluate dividend yield in conjunction with stock price movements.

Payout Ratio

Payout ratio is the percentage of a company’s net earnings that is paid out as dividends. A low payout ratio means that the company has more room to reinvest its earnings in capital expenditures or increase dividends. Investors should look for companies that have grown their earnings over time as this indicates the company is able to improve its bottom line and sustain dividend payments.

Price to Earnings

Price to earnings (P/E) ratio is a popular valuation ratio that shows how expensive a stock is. It is calculated by dividing the price of a stock by its earnings per share (EPS). A company with a P/E ratio lower than the sum of its earnings growth and dividend yield is undervalued, while a company with a P/E ratio higher than the sum of its earnings growth and dividend yield is overvalued.

Avoiding the Dividend Yield Trap

Investors should not blindly invest in stocks with high dividend yields as it may be a red flag. It is important to analyze a company’s balance sheet, income statements, and cash flows to ensure that the dividend yield is sustainable. A company with a solid business model that generates cash flows to support an increase in payouts is a better investment than a company with a high yield that may be rolled back if markets turn ugly.

Dividends are not a Guarantee

Investors need to understand that dividend payments are not guaranteed and can be suspended at any time. Dividend payments are part of a company’s profits, and a company can choose to reinvest its net income to expand its capital expenditure program, lower its debt, or acquire other companies to benefit from inorganic growth. It is important to build a portfolio of quality dividend-paying companies across sectors to mitigate risks.

In conclusion, investors should evaluate dividend stocks based on dividend yield, payout ratio, price to earnings, and sustainability of dividends. It is important to build a diversified portfolio of quality dividend-paying companies to mitigate risks and achieve long-term investment goals.

FAQs About Dividend Stocks in Canada

Investing in dividend stocks can be a great way to earn passive income while also seeing the stock value increase in the long term. Here are some frequently asked questions about dividend stocks in Canada:

Why do companies pay dividends?

Companies pay dividends as a way to attract investors by sharing profits with them. Established companies with recurring profits usually pay dividends, in contrast to emerging companies that need profits to expand at a faster pace. Dividends also reduce the risk of significant variations in the stock price as investors have to keep their shares for a certain amount of time to be eligible for the dividends.

Why should I buy dividend stocks?

Buying dividend stocks can be more than just interesting for the dividend return they provide. These stocks have a long track record of proven revenues and sustainable management/industry. Moreover, dividend stocks offer the opportunity to receive passive income and see the stock taking more value in the long term.

How are dividends paid?

Once the company pays cash dividends, investors receive the money directly in their brokerage account. The same applies to stock dividends; they appear directly as additional shares in the investor’s account. To see if the company pays through cash or stock dividends, investors can check the company’s website.

Is there a specific timeframe for dividends?

The timeframe for dividends is defined by the company. The most common timeframe is quarterly dividends. Companies may also pay monthly, semi-annually, or yearly dividends. Whether investors receive monthly or quarterly dividends, it won’t change what they will earn. A $3 monthly dividend won’t be different from a $9 quarterly dividend.

Do I pay taxes on dividends?

If investors are Canadian, their TFSA account will be their best friend. Dividends from Canadian companies generated in this account won’t affect their taxable income. They won’t be subject to taxes if they decide to retire them from their account either. If investors are looking for international diversification, which is usually recommended, it is however considered as not desirable in a TFSA. Investors have to keep Canadian assets as much as possible in their TSFA to get the most benefits. U.S. stocks held in a TFSA are subject to 15% withholding tax on U.S. dividend income. The same would apply to other foreign stocks held in a TFSA, with rates starting at 15%, depending on the country. If investors own U.S. stocks directly in their RRSP, there will be no withholding tax.

When should I buy dividend stocks?

Investors should plan to buy dividend stocks before the ex-dividend date. Typically, the ex-dividend date is two business days before the record date. The ex-dividend date represents the cut-off point for receiving the dividend. Investors have to own a stock prior to the ex-dividend date to receive the next dividend payment. They are not entitled to the next paid dividend if they buy a stock on or after the ex-dividend date.

Should I look for a high dividend yield?

A high dividend yield seems more than attractive, but investors have to be cautious about it. As the dividend yield is indexed to the stock price, a drop in the share value will augment the ratio. For example, during the first trimester of the pandemic, all the oil companies’ stock prices plummeted, increasing the dividend yield ratio. Most of these companies cut their dividends to save the most cash possible to pursue their operations and keep the companies afloat. In general, dividend yields of 2% to 4% are considered strong, and anything above 4% can be a great buy but will be riskier.

Do only stocks pay dividends?

No, stocks aren’t the only ones paying dividends. ETFs (Exchange Traded Funds) also pay dividends. ETFs represent another low-risk investment to diversify investors’ portfolios. Mutual funds, which are similar to ETFs, pay dividends as well and are as safe as dividends.

Are all stocks dividend stocks?

No, not all stocks are dividend stocks. Many stocks do not pay any dividends at all. Younger companies in the early stage of their development often do not pay any dividends. Those companies need more cash to finance their growth and are usually not in a position to pay dividends.

Are dividend stocks good during inflation?

If a company is able to continue paying dividends during periods of high inflation, that is certainly positive. This will often depend on the industry in which a company operates. High inflation impacts different industries in different ways.

Do dividend stocks outperform other stocks?

Although stocks that pay a generous dividend are usually seen as more defensive, any dividend stock can underperform over a certain period of time. There will likely be considerable variation in the performance of dividend stocks. Again, this often depends on the industry in which the company operates. For example, commodity stocks tend to perform well in periods of high inflation

Frequently Asked Questions

What are the top Canadian dividend aristocrats for 2023?

The top Canadian dividend aristocrats for 2023 include Enbridge, Fortis, Canadian Utilities, and Emera. These companies have a strong track record of paying consistent dividends and increasing them over time.

What are the best TSX dividend stocks to invest in?

The best TSX dividend stocks to invest in include Enbridge, Fortis, Canadian National Railway, and BCE. These companies have a history of paying reliable dividends and have the potential for long-term growth.

What are the highest dividend paying stocks in Canada for a TFSA?

Some of the highest dividend paying stocks in Canada for a TFSA include Enbridge, Power Corporation of Canada, and BCE. These stocks offer high dividend yields and have a history of paying consistent dividends.

What are the safest Canadian dividend stocks to invest in?

The safest Canadian dividend stocks to invest in include Fortis, Emera, Canadian Utilities, and BCE. These companies have a strong track record of paying consistent dividends and have a low risk of dividend cuts.

What are the best Canadian dividend ETFs for 2023?

The best Canadian dividend ETFs for 2023 include iShares Canadian Select Dividend Index ETF, BMO Canadian Dividend ETF, and Vanguard FTSE Canadian High Dividend Yield Index ETF. These ETFs offer exposure to a diversified portfolio of Canadian dividend paying stocks.

What are the best dividend stocks for retirement in Canada?

The best dividend stocks for retirement in Canada include Enbridge, Fortis, BCE, and Canadian Utilities. These companies have a history of paying reliable dividends and have the potential for long-term growth, making them suitable for retirement portfolios.

Related Articles

The Dividend Tax Rate in Canada: What You Need to Know in 2024

Dividend stocks in Canada offer a tax edge which proves ...

Top 10 Best Money Market ETFs For Canadians in 2024

Money Market Exchange Traded Funds (ETFs) are investment vehicles mainly ...

Is Cash App Available in Canada Yet? Nope, But Here Are the Best Alternatives in 2024

The widely used peer-to-peer payment platform, Cash App, is reportedly ...