Best Canadian Dividend Stocks – My Top 10

If you look at our dividend portfolio, you will notice that majority of our portfolio consists of Canadian dividend stocks. Being a Canadian I am slightly biased when it comes to owning Canadian dividend stocks. Why do I like owning Canadian dividend stocks?

Two words – Exchange rate.

Purchasing Canadian dividend stocks does not involve in exchanging currency, so it is way easier to pull the buy trigger. Meanwhile, if we want to purchase US listed stocks, we either need to exchange CAD to USD using Norbert gambit, or wait until we receive enough dividend income in US currency. Needless to say, it is slightly more complicated to buy US listed dividend stocks.

By now, you should all know that stock market goes up and down on a daily basis. However, long-term, stock market has a tendency to increase in value. Therefore, I believe it is important to identify the 10 best Canadian dividend stocks so you can continue monitoring them and pull the buy trigger whenever there is a good buying opportunity.

Which 10 stocks made my best Canadian dividend stocks list?

 

Best Canadian Dividend Stocks – Top 10

Here are my top 10 list. One thing to note is that we own all of these stocks in our portfolio and have no plan to sell any of them. We plan to continue adding shares of these stocks in the future.

 

1. Canadian Imperial Bank of Commerce (CM.TO)

Canadian Imperial Bank of Commerce (CIBC) is a global financial institution. The Company provides a range of financial products and services to approximately 11 million individual, small business, commercial, corporate and institutional clients in Canada and around the world. The Company operates through three segments: Retail and Business Banking, Wealth Management and Capital Markets.

  • Sector: Financial Services
  • Dividend Yield: 4.68%
  • Dividend Payout Ratio: 47.27%
  • PE Ratio: 10.10
  • 5 Year Dividend Growth Rate: 6.5%
  • Dividend Increase Streak: 6 years

CIBC has one of the highest dividend yield of all Canadian stocks with one of the lowest PE ratios. Both dividend payout ratio and 5 year dividend growth rate are healthy. CIBC has been paying dividends since the late 1800’s. The company currently high exposure in the Canadian domestic market compared to other major Canadian banks, but CIBC is trying to expand into the US market.

 

2. TD Bank (TD.TO)

Toronto-Dominion Bank is a Canada-based bank, which operates in the North America. It is an online financial services firm, with over 10.2 million online and mobile customers. Its segments include Canadian Retail, U.S. Retail, Wholesale Banking and Corporate. TD is one of the largest banks in Canada.

  • Sector: Financial Services
  • Dividend Yield: 3.41%
  • Dividend Payout Ratio: 45.45%
  • PE Ratio: 13.32
  • 5 Year Dividend Growth Rate: 10.6%
  • Dividend Increase Streak: 6 years

I like TD as one of the best Canadian dividend stocks because its readily available banking branches. You can easily spot TD branches walking around any major Canadian and US cities.

 

3. Royal Bank (RY.TO)

Royal Bank of Canada (RBC), is a diversified financial services company. The Company provides personal and commercial banking, wealth management services, insurance, investor services and capital markets products and services on a global basis. The Company serves personal, business, public sector and institutional clients in Canada, the United States and approximately 40 other countries. The Company’s business segments include Personal and Commercial Banking, Wealth Management, Insurance, Investor and Treasury Services, Capital Markets.

  • Sector: Financial Services
  • Dividend Yield: 3.71%
  • Dividend Payout Ratio: 49.73%
  • PE Ratio: 13.40
  • 5 Year Dividend Growth Rate: 9.3%
  • Dividend Increase Streak: 6 years

Yet another Canadian banks on our 10 best Canadian dividend stocks (do you see a trend?). Royal Bank has been paying dividend since 1870 and has never missed a dividend payment since. Needless to say, the 247 years of dividend payment streak is pretty impressive.

 

4. Bank of Nova Scotia (BNS.TO)

The Bank of Nova Scotia is an international bank and a financial services provider in North America, Latin America, the Caribbean and Central America, and Asia-Pacific. The Bank offers a range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets.

  • Sector: Financial Services
  • Dividend Yield: 3.92%
  • Dividend Payout Ratio: 49.22%
  • PE Ratio: 12.55
  • 5 Year Dividend Growth Rate: 7%
  • Dividend Increase Streak: 6 years

Bank of Nova Scotia is probably the most diversified Canadian bank out of the big five. It provides financial services not just in the Americas but Asia-Pacific as well.

 

5. Intact Financial (IFC.TO)

Intact Financial is an insurance company. It offers a range of car, home and business insurance products, including personal auto, personal property, commercial P&C and commercial auto.

Intact Financial was the very first Canadian dividend paying stock that I purchased many years ago. Since my purchase, Intact Financial has managed to raise its dividend payments every year. Best of all, the stock price has increased significantly since, making me a happy shareholder.

  • Sector: Financial Services
  • Dividend Yield: 2.49%
  • Dividend Payout Ratio: 50.39%
  • PE Ratio: 20.25
  • 5 Year Dividend Growth Rate: 9.4%
  • Dividend Increase Streak: 12 years

At PE ratio above 20, I think the stock is a bit over priced. I believe the high PE ratio is caused by the market putting a slight premium on this particular stock.

 

6. Saputo (SAP.TO)

Saputo produces, produces, markets and distributes dairy products, including cheese, fluid milk, extended shelf-life milk and cream products, cultured products and dairy ingredients. The Company has three geographic sectors. The Canada Sector consists of Dairy Division (Canada). The USA Sector aggregates the Cheese Division (USA) and the Dairy Foods Division (USA). The International Sector combines the Dairy Division (Argentina), the Dairy Ingredients Division and the Dairy Division (Australia).

  • Sector: Consumer Defensive
  • Dividend Yield: 1.48%
  • Dividend Payout Ratio: 33.68%
  • PE Ratio: 22.74
  • 5 Year Dividend Growth Rate: 14.9%
  • Dividend Increase Streak: 12 years

Saputo operates under quite a number of brand names. For Canadians, we are probably most familiar with the Dairyland brand. I like Saputo’s business because many Canadians use dairy products on a daily basis. Furthermore, Saputo is one of the few Canadian dividend paying stocks that fall under the consumer defensive sector. If you are looking for diversification, Saputo may be a good stock to own.

 

7. Telus (T.TO)

Telus is one of the big three Canadian telecommunication companies. The Company provides a range of telecommunications services and products, including wireless and wireline voice and data.

  • Sector: Communication Services
  • Dividend Yield: 4.38%
  • Dividend Payout Ratio: 93.33%
  • PE Ratio: 21.48
  • 5 Year Dividend Growth Rate: 10.8%
  • Dividend Increase Streak: 13 years

Canadians are addicted to smartphones and data. This will allow Telus to continue making massive amount of profit. The high payout ratio is a bit concerning though. This is an indication that Telus’ revenue growth has slowed compared to its dividend growth. It is highly possible that Telus’ dividend growth rate will slow down over the next few years, unless Telus can increase revenue growth. This is why Telus is exploring other telecommunication services to growth its revenue.

 

8. Fortis (FTS.TO)

Fortis Inc. is a Canada-based electric and gas utility holding company. The Company’s segments include Regulated Utilities and Non-Regulated Utilities.

  • Sector: Utilities
  • Dividend Yield: 3.47%
  • Dividend Payout Ratio: 70.48%
  • PE Ratio: 20.35
  • 5 Year Dividend Growth Rate: 5.6%
  • Dividend Increase Streak: 43 years

I see Fortis’ dividend payments like bond interest payments. Many Canadians use natural gas or electricity to heat their home during winter, or use natural gas or electricity for cooking purposes, making Fortis a very stable stock to own.

 

9. Canadian National Railway (CNR.TO)

Canadian National Railway Company is engaged in the rail and related transportation business. The Company’s network of approximately 20,000 route miles of track spans Canada and mid-America, connecting approximately three coasts, including the Atlantic, the Pacific and the Gulf of Mexico and serving the cities and ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama), and the metropolitan areas of Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth (Minnesota)/Superior (Wisconsin), and Jackson (Mississippi), with connections to all points in North America.

  • Sector: Industrials
  • Dividend Yield: 1.64%
  • Dividend Payout Ratio: 32.22%
  • PE Ratio: 19.73
  • 5 Year Dividend Growth Rate: 18.2%
  • Dividend Increase Streak: 21 years

Canadian National Railway has a pretty low dividend yield, but the company has relatively high dividend growth rate over the last 5 years. Although rail is not frequently used for passenger travels here in North America, rail is still the most efficient way for transporting goods. Canadian National Railway’s large rail network will allow the company to provide transportation services in North America and bringing profits to shareholders.

 

10. Suncor (SU.TO)

Suncor Energy Inc. (Suncor) is an integrated energy company. The Company is focused on developing Canada’s petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production (E&P), and Refining and Marketing.

  • Sector: Energy
  • Dividend Yield: 3.04%
  • Dividend Payout Ratio: 79.01%
  • PE Ratio: 26.02
  • 5 Year Dividend Growth Rate: 22%
  • Dividend Increase Streak: 14 years

Suncor is a major energy company here in Canada. It acquired Canadian Oil Sand a recently to increase its exposure in oil sands. Suncor is currently facing some headwinds due to the low oil price. However, I believe its revenues should go up when oil price recovers.

 

Final Thoughts

Outside of the Canadian banks, most of these top Canadian dividend stocks have relatively high PE ratio. This indicates that some of these stocks are currently over-valued. It is worthwhile to wait for price pullbacks. Some of these top Canadian dividend stocks listed above have payout ratios higher than 70%. This is a sign that these companies’ future dividend growths may slow down.

Is it better to purchase one of these top Canadian dividend stocks, or purchase lesser known Canadian dividend stocks with lower yield and higher dividend growth? This is a personal decision you need to make yourself. Personally I believe a mix of top Canadian dividend stocks listed above and some lesser known Canadian dividend stocks is a great strategy.

Do you already down dividend stocks and want to create an spreadsheet to track your portfolio? Take a look at my Google Spreadsheet Dividend Portfolio Template.

 

Note: This blog post represents my opinion and not an advice/recommendation to purchase these stocks. Before you buy any stocks, please consult with a qualified financial planner.

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24 Comments

  • Reply
    Passivecanadianincome
    October 25, 2017 at 4:13 pm

    Good list bob. Personally I would switch the suncor pick with enbridge. higher dividend and longer dividend increase streak. (Although i never realised suncors dividend growth rate was that high) The oil sands scare me as a investment because of how much it costs and the environmental impacts. Just my 5 cents…. haha either way great list. Cheers

    • Reply
      Tawcan
      October 26, 2017 at 5:15 am

      Thanks man. I was debating between Enbridge and Suncor. Picked Suncor because it has slightly less debt compared to Enbridge. Both stocks are solid though.

  • Reply
    DivHut
    October 25, 2017 at 6:20 pm

    Canada does offer many solid long term investing opportunities. I’m happy to own TD, BNS and RY in my retirement account and have CM on my watch list. Thanks for giving us your top 10!

    • Reply
      Tawcan
      October 26, 2017 at 5:17 am

      Glad that we own the same Canadian banks.

  • Reply
    renewed investor
    October 25, 2017 at 6:38 pm

    I am concerned about enbridge as it has high debt and the stock price is at 54 weeks low. That said, the company seems to be well managed. Suncor to me is a better bet with EPS able to meet dividend payout.
    I have 7 out of your top 10 list. The outstanding 3 are definitely in my list to buy namely IFC, Saputo and Suncor.

    Cheers!

    • Reply
      Tawcan
      October 26, 2017 at 5:18 am

      Enbridge has high debt because it keeps borrowing to build more pipelines and such. IFC and Saputo are both solid dividend stocks IMO.

  • Reply
    Dividend Diplomats
    October 25, 2017 at 6:55 pm

    Always great to see these lists Tawcan. I’m pretty excited that I own the number 1 stock on the list. Love having a stake in Canadian Imperial. Quite frankly, all the major Canadian Banks that I have researched are strong performers. I am a little interested to see that only one of the stocks is considered a Dividend Aristocrat. I thought there would be more companies with consecutive increase streaks greater than 25.

    Thanks for taking the time to prepare this!

    Bert

    • Reply
      Tawcan
      October 26, 2017 at 5:19 am

      It’s interesting that most of the Canadian dividend stocks aren’t considered as dividend aristocrats. I guess continuing paying dividends is better than suspending dividend.

  • Reply
    Team CF
    October 26, 2017 at 12:02 am

    A list of solid companies indeed, we own 5 our out of 10. Some of the other are on the horizon too, but currently don’t have funds to start a new position (and considering we cannot contribute anymore, we have to wait until we have sufficient cash form existing dividend income streams).
    Thanks for the good write up Bob.

    • Reply
      Tawcan
      October 26, 2017 at 5:20 am

      That’s my problem too… cannot contribute anymore. Well we can, just have to contribute in taxable accounts.

  • Reply
    wealthfromthirty
    October 26, 2017 at 2:26 am

    Does this top 10 come in an ETF 😛

    Interesting that Canadian banks seem to have a lower payout ratio compared to Australian banks at ~80% payout. Our top 4 bank stocks in Oz have slightly higher dividend yield due to this (around 5.0-5.5% yield) and higher PE ratio, around 14. I’m still waiting for them to reduce in price a little.

  • Reply
    Tom @ Dividends Diversify
    October 27, 2017 at 8:34 am

    Tawcan, I’m with you on the exchange rate issue. Being from the US, I invest mostly in US based stocks. Being a dividend investor, I like to know how much I’m going to get paid and not have to worry about exchange rates influencing my payments. We also have to deal with the 15% tax on Canadian company dividends here in the US. For better or worse, those issues keep me mostly invested domestically, buy your list is a nice representation of good Canadian companies. Tom

    • Reply
      Tawcan
      October 30, 2017 at 1:39 pm

      Hi Tom,

      We need to deal with the 15% withholding tax for US dividend stocks too. But don’t need to worry about that if we invest US dividend stocks in RRSP. I think it’s the same if you invest Canadian dividend stocks in 401(k) too.

  • Reply
    wealth from thirty
    October 27, 2017 at 1:56 pm

    The Reserve Bank (like the US Fed) sets the cash rate and it’s currently at 1.5%. That’s a pretty standard interest rate on a transaction acc and on an online savings account you can get 2.8-3%. We also have an investment culture geared heavily toward dividends, partly because of franking credits (tax credits for what tax was paid at the company tax rate) and partly just tradition. So banks pay a high dividend and are held by people who expect a high dividend. The share price often get bid up and down based on the yield. Results season for a few of our banks this coming few weeks so it’ll be interesting reading.

    • Reply
      Tawcan
      October 30, 2017 at 1:41 pm

      That’s an interesting fact to know. Interestingly enough, Canadian banks seem to pay higher dividend yields than US counter parts. I’m not exactly sure why this is the case.

  • Reply
    dividendgeek
    October 29, 2017 at 8:19 am

    Canadian stock yields are awesome. But, they do seem concentrated in finance sector. I own TD. I have been thinking about buying iShares MSCI Canada ETF … I also have exposure to Canada through my VXUS (6.7%).

    • Reply
      dividendgeek
      October 29, 2017 at 8:23 am

      Nice blog! Adding you to my blogroll

    • Reply
      Tawcan
      October 30, 2017 at 1:43 pm

      Yup the Canadian market is very financial and energy focused. That’s why when it comes to diversification, we are slightly limited.

  • Reply
    Ryan
    October 29, 2017 at 11:45 am

    Thanks for the list Bob. Hey where do you get your payout ratios (and other values)? I seem to get different values from different websites.

    Plus, how do you know what a good PE is for various stocks? For financials, it seems that a low PE of 10-15 is the norm. But for other stocks, we seem to accept higher PE’s.

    • Reply
      Tawcan
      October 30, 2017 at 1:44 pm

      I wrote the post over a span of a week so some of the numbers may have changed slightly.

      In terms of PE, obviously the lower the better but it also depends on the sector. Some sectors will have lower PE’s than other sectors.

  • Reply
    Sascha
    October 30, 2017 at 2:56 pm

    I have 5 of your 10 in my top ten. Then instead of RY, I went LB and Suncor I exchanged for ENB. Now that Saputo made that new acquisition in Australia it’s on my watch list, too. Just waiting for a good entry.

    • Reply
      Tawcan
      October 31, 2017 at 6:55 pm

      LB and ENB are both pretty solid dividend stocks too. Don’t own LB as we already own 6 Canadian banks.

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