The Best Dividend Paying Stocks to Buy in Canada Today - Stocktrades (2024)

Many investors first learning how to buy stocks in Canada want to know what the best options are today in terms of dividend stocks. That’s exactly why we’re going to go over some of the top options in the country today.

These stocks are picked not only for their dividends, but also due to strong company fundamentals. A dividend is only as good as the company behind it, and we need to understand that the dividend itself is only one portion of total return.

What are the best dividend stocks in Canada?

10. Canadian National Railway (TSE:CNR)

Canadian National Railway(TSE:CNR) is the largest rail company in the country. As such, it has been a very popular option for income investors due to reliable cashflows and an incredible economic moat.

The company has over 33,000 kilometres of track and primarily hauls forest, coal, sulphur, grain, fertilizer, automotive parts, and much more.

You’ll likely notice that many of these products are critical to a thriving economy.

As such, railways are often referred to as the bellwether of the Canadian economy. When railways begin to struggle, it is often followed by a slowing economic activity.

However, despite being prone to different economic conditions, the Canadian National Railway has thrived. The company is growing its dividend at an impressive pace. It has a dividend growth streak of 28 years and a five-year dividend growth rate of 11.67%.

The stock’s consistent rise in price has resulted in a low yield, with the company yielding either in the high 1% or low 2% range.

But a low yield doesn’t equal a poor company. Chasing yield can often get people in trouble, and despite Canadian National having an unattractive yield, it has more than doubled the returns of the TSX index over the last decade. In fact, it has put up annualized returns of just over 18% during that timeframe, more than the S&P 500.

Despite its size, CN Rail has been able to adapt, reroute, and focus operations on customers who provided essential services.

The company’s handling of the pandemic has been rightfully lauded by industry experts, and we expect CN Rail to put up strong returns moving forward despite the market pricing in a recession.

9. Metro (TSE:MRU)

Metro(TSE:MRU) is one of the largest grocers in the country and is also one of the most reliable Canadian dividend stocks to own today.

Consumer staple stocks, such as grocery stores, tend to be viewed as “boring” options. However, they also make some of the best dividend stocks.

Metro is tied for the 8th longest streak in the country with crude oil producer Imperial Oil and fellow retailer Empire Company. However, one of the clear differentiators between Empire and Metro is Metro’s dividend growth.

With a 29-year dividend growth streak, the company also sports a low double-digit dividend growth rate over the last 5 years. From a company operating in a mature sector like Metro, this is outstanding dividend growth.

With payout ratios in terms of earnings and free cash flows in the 25-35% range as well, this signals that the company shouldn’t be slowing this dividend growth pace anytime soon.

The company is not a pure-play grocer either. It entered the pharmacy scene with a major acquisition of Jean Coutu in 2018, and overall, it has one of the most dominant presences in Quebec out of all major grocery stores. The province currently holds over 70% of its owned and franchised food and drug stores.

You’re not going to knock it out of the park with a company like Metro in terms of capital appreciation. But you’re going to get a reasonable mid-1% dividend yield and likely mid-to-high, single-digit growth.

Not every stock inside of your portfolio needs to be flashy. And, if the capital markets continue to take a hit like we’re seeing now, interest rates remain high, and consumers start to slash spending, shareholders will likely be happy owning MRU.

8. TC Energy (TSX:TRP)

We can’t talk about the top dividend stocks in Canada without mentioning one of Canada’s pipelines.TC Energy(TSX:TRP) is the second-largest midstream company in the country, and it has a 23-year dividend growth streak. This is tied for the 13th-longest dividend growth streak in the country.

The company provides 25% of North America’s natural gas transmission and has over 90,000 km of natural gas pipelines.

Over the course of its dividend streak, it has averaged 7% dividend growth. The company had been guided to 5-7% dividend growth but recently downgraded that growth to the low single digits because of inflation and rising rates.

However, considering this company yields typically in the 6% range, we can’t expect much dividend growth.

Now that the price of oil is recovering and stabilizing, it’s likely that TC Energy, despite not being impacted as much by the price of oil as a producer, will still experience some of the growing oil price tailwinds.

The company has a low-risk business model in which 95% of EBITDA is generated from regulated or long-term contracted assets. This is exactly why, in the midst of the pandemic, it stated that operations were relatively unaffected.

Many pipelines have take-or-pay contracts with producers. This means that regardless of the product shipped, the pipeline gets paid.

This creates extremely reliable cash flows and is why companies like TC Energy and Enbridge (TSE:ENB) have some of the country’s safest, most reliable dividends.

The company currently yields in the low 7% range, is trading at less than 12 times forward earnings, and is set to benefit from an energy crisis that, for many analysts, feel is just getting started.

7. National Bank of Canada (TSE:NA)

In reality, we could litter our top 10 list with Canada’s Big 6 banks. They are among the most reliable income stocks in the world.

However,National Bank(TSE:NA) is clearly separating itself from the pack in terms of overall performance. Could we have placed a higher-yielding company like theBank of Nova Scotia(TSE:BNS) or theCanadian Imperial Bank of Commerce(TSE:CM)? Sure, we could have. But in my opinion, National is the superior bank.

The National Bank of Canada is the sixth largest among Canadian banks and has a comprehensive range of financial services.

With a strong focus on Quebec and Toronto, the bank seamlessly integrates personal and commercial banking, wealth management, and a dynamic financial markets group within its operational segments. It is well known for being the first major bank here in Canada to gocommission-freeon its brokerage platform.

The bank has a 14-year dividend growth streak and a healthy payout ratio of only 45% of its earnings. This has allowed the bank to grow the dividend at a high single-digit pace over the last 5 years.

Of note, we will likely see the major financial institutions take a step back regarding dividend growth because of the potential recession in 2024. As a result, we can likely expect mid-single-digit dividend growth from National Bank moving forward.

These prudent moves should make investors feel more confident about Canada’s financial institutions navigating our current environment. Many buy them because they are dividend-paying stocks. Still, we do have to step back and understand there is an underlying business that supports the dividend.

In addition to this, the banks acquisition of Canadian Western Bank, although not accretive to earnings until 2027, should allow National Bank to unlock more value in western Canada. Because CWB was a smaller more regional bank, the acquisition by National should immediately open it up to more products, more loan offerings, and looser regulations.

With a yield of 4%~ at the time of writing, National Bank also provides a steady income for those looking to add it to their dividend portfolios.

6. Canadian Apartments REIT (TSE:CAR.UN)

Canadian Apartments REIT(TSE:CAR.UN) is one of the largest residential real estate trusts in the country. The trust has a dominant presence in the sector and is one of the most popular REITs in Canada.

You might be saying right now, “Well, I’m not looking for the top REITs; I’m looking for the top dividend stocks!” But the reality is, if you’re looking to build a strong dividend portfolio, there is a good chance it will contain a portion of REITs for a few reasons.

For one, a real estate investment trust is forced to pay back a particular percentage (90%+) of its earnings to unitholders. As a common stockholder, the dividend does not necessarily need to be placed highest on the totem pole.

Secondly, due to the fallout of the pandemic, inflation will be a long-standing fear and overall concern regarding the deterioration of investor capital.

Typically, REITs tend to perform well in a rising rate environment. As rates go up, so do property values. However, 2022/23 presented a very unique situation. Rates went upso fastthat a tailwind quickly turned into a major headwind for many REITs.

As a result, CAPREIT is trading at very attractive valuations for those who want exposure to residential real estate.

The company’s portfolio includes mid-tier and luxury properties, and it generates the majority of its revenue from the Toronto and Greater Montreal regions.

CAPREIT is in one of the best financial positions of all Canadian REITs, with a debt-to-gross book value of approximately. Its dividend accounts for around 60% of funds from operations.

In 2020, the company hit a huge milestone and was added to the TSX 60 Index, which represents 60 of the biggest companies on the Toronto Stock Exchange.

The REIT doesn’t have the flashy yield that many others do in the 3% range. However, it’s important to understand that while payout ratios were high and dividends were getting cut in the sector during the pandemic, CAPREIT was at no risk of cutting the distribution.

As mentioned at the start of the article, the reliability of a dividend is much more important than the overall yield.

5. TELUS (TSX:T)

You can’t develop a top dividend list in Canada without including one of the Big 3 Telecoms. Despite pressure from the Feds to increase competition, TELUS, Rogers, and BCE still own more than 94% of the market share.

All three are solid dividend payers as well, but for me, one stands out.

Leaving the telecom business aside, what makesTELUS(TSX:T) unique is that it does not have a capital-intensive Media segment like its peers.

Instead, TELUS has different verticals, such as TELUS Health, TELUS Agriculture, and TELUS International, which all provide different and more attractive growth potential.

High rates have stymied telecoms due to the high-capacity nature of the industry. However, TELUS is better positioned to navigate such an environment and set up for a quicker recovery than its peers because it doesn’t have exposure to a traditional media segment.

Turning our attention to the dividend, TELUS has demonstrated an unwavering commitment to the shareholders, and their 20-year dividend growth streak is the longest in the industry.

The company has also been extremely forthcoming with shareholders. Over the years, it has publicly posted 3YR targeted dividend growth rates and has always executed. The current targeted annual growth rate is in the 7-10% range through 2025.

TELUS currently yields in the low 7% range, which is well above the company’s historical average (~4%). The reason for this is simple: valuations have come down as the telecom industry navigates near-to-medium-term challenges.

The other notable issue to be mindful of is the company’s high payout ratios. The company is currently paying out more than 100% of earnings and cash flow.

However, the main reason for the high ratios today is that TELUS underwent a major restructuring initiative that negatively impacted earnings and accelerated capital investments in Fiscal 2023.

On a forward basis, the ratios look much better. The payout ratio against earnings is expected to drop just below 100%, and against cash flows (which is the most important ratio for telecoms), it is expected to drop in the 85% range.

It is worth noting that TELUS has a targeted payout ratio against cash flows of 60-75% and expects significant cash flow growth in 2024 and beyond.

Don’t expect earth-shattering returns from the company’s share price. But, on this one, for a decade, reinvest the dividends, and you’ll likely be happy.

4. Royal Bank of Canada (TSX:RY)

The Royal Bank of Canada(TSX:RY) is thelargest bank in Canadaand is among the largest companies in the country. It has been named Canada’s most valuable brand for six years running and is consistently among the best-performing Big Five banks.

In fact, it has been one of the top-performing Big Five banks over the past 10-year period. As it has matured, the other banks have started to outperform.

However, make no mistake about it: this company has the widest moat of any of the Big 5 due to its strong international presence.

The company operates in the capital markets via RBC Direct Investing but also offers commercial banking, retail banking, and wealth management services.

At 50%, RBC has one of the lowest payout ratios among its peers. The company is the Canadian bank with the most geographical exposure, with exposure in over 40 countries.

Interest rate increases are set to benefit Canada’s banks. However, there is a fine line here. Raising interest rates ultimately helps margins for the banks as they can lend money for higher rates.

However, the Bank of Canada has been raising rates at a significant pace. In fact, the fastest in its history. As a result, recession fears have driven down bank valuations.

This is likely an overthinking, as Royal Bank has proven to be an exceptional performer regardless of economic circ*mstances. Royal Bank has a 13-year dividend growth streak, during which time it has grown the dividend by mid-single digits annually.

Now yielding in the 4% range, the Royal Bank is deserving of its place among Canada’s top dividend stocks.

3. Canadian Natural Resources Ltd (TSE:CNQ)

For a long time, we avoided including any Canadian oil producers on this list. However, the environment has certainly changed, and oil companies have a chance to perform exceptionally well over the next few years.

So, whyCanadian Natural Resources(TSE:CNQ) and not a company like Suncor or Imperial Oil?

Well, Canadian Natural has repeatedly proven that it is the best major oil and natural gas producer in the country.

The company has raised the dividend for 23 years and has a double-digit 5-year dividend growth rate.

Despite major producers like Suncor and many junior producers slashing the dividend at a record pace, Canadian Natural managed to actually raise the dividend in the midst of a global pandemic and oil crisis.

The company is one of the lowest-cost producers in Canada, with breakeven prices in the $35~ WTI range. This makes the company extremely reliable in almost any price environment, as cash flows will remain positive.

At $70 WTI, which would be considered the low point prediction by most analysts over the next few years, Canadian Natural will generate a significant amount of free cash flow and is in an outstanding position to return it to shareholders.

As balance sheets are restored, new projects and expansion will likely be put on the back burner. Instead, Canadian Natural will likely look to return capital to shareholders through increased and special dividends along with share buybacks.

In fact, they are now in a position to return all excess free cash flow to shareholders in the form of dividends and buybacks now that they’ve reached their target leverage ratio.

Despite its extremely bullish situation, Canadian Natural Resources isn’t as high on this list as others. Why? The cyclical nature of the business makes it very difficult to profit from oil and gas companies over the long term. Timing a proper exit when the market begins to turn sideways or downwards is critical to outperforming.

Canadian Natural’s share price still does have some upside here, but capital gains shouldn’t be your focus with oil and gas producers. Instead, soak up the dividends during this oil and gas boom and try to find an opportunity to exit when things calm down.

2. Alimentation Couche-Tard (TSE:ATD.TO)

Alimentation Couche-Tard(TSE:ATD) is one of the best Canadian dividend stocks to buy today, yet it doesn’t get much attention in the dividend world.

Why is that?Well, we’ll get to that in a bit. With a market cap in excess of $80B, Couche-Tard is one of the largest convenience store operators in the world and has over 15,000 stores globally.

A recent acquisition has the company entering into the carwash market as well.

If you’re from Eastern Canada, “Couche-Tard” will be a common name. However, the company tends to run under arguably its most popular brand, Circle K.

Circle K is truly a global brand, selling gasoline, beverages, food, car wash services, tobacco, and so much more across North America and Europe, but also in countries like China, Egypt, and Malesia.

Now that we know what the company does, let’s move on to the dividend. Couche-Tard has been growing its dividend at an exceptional rate. In fact, the main reason Couche-Tard is on this list is because of its growth.

With a 14-year dividend growth streak, a 5-year dividend growth rate of over 20%, and a payout ratio under 14%, this is a company that is in one of the best positions in the country to fuel dividend growth for investors.

With a yield of less than 1%, it’s often overlooked by income seekers. However, we do have to take into consideration overall returns here. And if we do that, Couche-Tard is simply a no-brainer.

With this type of dividend growth, its yield can only remain low if one thing is occurring: rapid share appreciation. And this is 100% the case. In fact, a $10,000 investment in Couche-Tard just a decade ago is now worth over $55,000. At that point, I don’t care about the yield. I’ll sell some shares and create my own dividend!

If there’s one stock on this list that should make investors reconsider how important yield is to them, it’s definitely Couche-Tard. The company is a more established blue-chip player now so that growth won’t be as extensive, but it still has much room.

1. Fortis (TSX:FTS)

Fortis(TSX:FTS) has been a mainstay on our list of top dividend stocks for years. As the largest utility company in the country, Fortis is arguably one of the most defensive stocks to own.

Fortis has the second-longest dividend growth streak in Canada. At 50 years, it is only the second Canadian stock to reach Dividend King status, a prestigious status reserved for those who have raised dividends for at least 50 consecutive years.

Given our current uncertainty, dividend safety and reliability are the main reasons why Fortis is our top dividend stock in Canada. Throughout the past three, five, and ten years, Fortis has consistently raised the dividend by approximately 6%.

Further demonstrating its reliability, Fortis is one of the few companies that provides multi-year dividend growth targets. Through 2028, Fortis expects to raise the dividend by ~4-6% annually—just slightly below historical averages. This is not surprising, considering the impacts that rising rates had on utilities.

Unlike Royal Bank, which would have benefitted from rising interest rates, a company like Fortis would be negatively impacted by interest rates. This is because utilities are a capital-intensive industry that requires large capital investments and debt to build infrastructure like power generation facilities and transmission lines.

However, Fortis’s movement in price has been relatively unimpacted by rising rates over the long term and likely won’t be moving forward. That is a strong sign of confidence in the company.

If you reinvest your dividends, $10,000 in Fortis in the mid-1990s is now over $271,000. The company has simply been an exceptional performer.

And, with a beta of 0.2, indicating this stock is 1/5th as volatile as the overall market, it seems to operate almost more like a bond.

Combine strong dividend growth with an attractive yield in the mid-4 % range, and you are looking at the top-income stock to own in Canada today. Not only can investors lock in a safe and attractive dividend, but they can also do so at respectable valuations.

This list of top Canadian dividend stocks takes 3 things into consideration

The growth, safety, and current yield of the dividend.

A high-yielding income stock may be placed lower on this list due to safety, and a low-yielding stock could be placed higher on this list due to the company’s dividend growth.

Warning – The best dividend stocks don’t always have the highest yield

A mistake that dividend investors, particularly new ones who haven’t been burned yet, make time and time again is having tunnel vision on the dividend yield. They ignore the dividend payout ratio or the company’s financial health and instead chase high yields to generate larger passive income.

Unfortunately for many in early 2020, this strategy resulted in devastating consequences. We witnessed the quickest pace of dividend cuts in history, and many income stocks that were bloated in value due to their high yields saw their share prices collapse.

Chasing yield is one of the biggest and most common mistakes beginners make, and it is imperative that you prioritize the quality of the company over its pay.

Is there an ETF to make dividend investing easier?

Many people who don’t have the time to consistently monitor a dividend portfolio want to make their lives easier by investing in an ETF. Fortunately, we have a plethora of them in Canada.

Whether it is Vanguard, Horizons, BMO, or iShares, Canadians can choose a wide variety of dividend ETFs to generate passive income in a single click. Some quick examples?

• Horizons Active CDN DividendETF (TSE:HAL)
• BMO Canadian DividendETF (TSE:ZDV)
• S&P/TSX Canadian Dividend Aristocrats Index Fund (TSE:CDZ)
• iShares Core S&P/TSX Composite High Dividend Index ETF (TSX:XEI)
• iShares Canadian Select Dividend Index ETF (TSX:XDV)

It’s important to note that these dividend ETFs come with management fees and need to be considered before purchasing.

What Canadian stocks pay the best dividends?

You will typically see the best dividends located in reliable, mature sectors like telecoms,pipelines, and financial companies. However, we have plenty ofindustrial optionsthat pay strong dividends as well, but their yields are often not as high as those of a pipeline or telecom company.

Which Canadian stocks pay monthly dividends?

Right now, we track over 67 Canadian stocks and REITs that pay monthly dividends. If you’re interested to see what they are and what we view as the best, you canread our page on monthly dividend stocks here.

What are the 5 highest dividend-paying stocks?

At the time of writing, the 5 highest dividend-paying stocks in Canada are:

• Fiera Capital (FSZ) 11.57%
• Peyto Exploration (PEY) 10.70%
• Canacol Energy (CNE) 10.35%
• Labrador Iron Ore (LIF) 10.15%
• Birchcliff Energy (BIR) 9.74%

However, I wouldstronglycaution investors from focusing on dividend yield and instead look to buy strong companies. A very high yield can often be a warning sign of a dividend cut. And a dividend cut usually leads to a cratering share price.

How to make $1,000 a month in dividends?

If we assume an investor could build a safe, reliable portfolio of Canadian stocks that yield around 4%, you would need a $300,000 portfolio to generate $1000 in dividends every month.