Best Canadian Dividend Stocks for 2021 -My top 10

Mrs. T and I are working toward financial independence by investing in dividend stocks and index ETFs. Our plan is to live off dividends. Therefore, I’m always on the lookout for great dividend stocks to invest in. What are some of the best Canadian dividend stocks?

When it comes to picking best Canadian dividend stocks, it is important to not just look at the dividend yield. Other factors like dividend growth rate, earning history, company revenue growth, return on equities, and cash flow are also important to monitor.

Why is dividend stocks so attractive? Because the stable dividend payments. With low interest rates, why not hold dividend paying stocks that pay regular stable and uninterrupted dividends? Some Canadian utility stocks like Fortis and Canadian Utilities have been raising dividends for over 40 years and paying at an attractive dividend yield rate. Furthermore, the Big Five Canadian Banks have been paying uninterrupted dividends since the late 1800s. This is one of the key reasons why we hold Canadian bank shares rather than buying one of the Canadian bank ETFs. So why hold bonds that pays around 1% when you can get safe dividends at around 4%?

If you look at our dividend portfolio, you will notice that we own quite a bit of Canadian dividend stocks. While we have been trying to own more ex-Canada dividend stocks, the reason for owning so many Canadian dividend stocks is mostly due to the exchange rate.

By now, you should all know that the stock market goes up and down daily. However, long-term, the stock market has a tendency to increase in value. That’s why time in the market is far more important than timing the market. 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 is my top 10 list of best Canadian dividend stocks. These picks are based on total growth – a combination of dividend growth and stock price appreciation. I also considered potential opportunities once the global COVID-19 pandemic is over.

And since the market changes, these best Canadian dividend stocks are a snapshot at time of writing. Parameters like dividend yield and PE ratio will change.

We typically add shares to dividend stocks that we already own whenever there’s a pullback. For example, if there’s a 10% or 15% pullback within a short period of time, it usually makes sense to buy these dividend stocks. After all, we are investing for the long term, not the short term.

1. Alimentation Couche-Tard (ATD.B)

Alimentation Couche-Tard doesn’t have the highest dividend yield but its dividend growth rate over the last ten years has been fantastic. ATD also has had some fantastic revenue growth and strong cash flow. The strong growth is contributed to the 14,000 convenience stores in North America and Europe.

best Canadian dividend stocks - ATD.B
  • Sector: Consumer Defensive
  • Dividend Yield: 0.83%
  • Dividend Payout: 11.82%
  • PE Ratio: 13.43
  • 5 Year Dividend Growth Rate: 21.7%
  • Dividend Increase Streak: 11 years

ATD’s overall valuation has come down recently. The historical PE ratio is around 17 so at a PE ratio of around 13, ATD can be considered quite cheap from a historical point of view. Some dividend investors may overlook ATD due to the initial dividend yield of less than 2%. While the initial dividend yield is extremely low, ATD has been growing its dividends at an impressive rate. For me, I think ATD is a great Canadian dividend stock to hold if you want something defensive.

ATD has almost 40 years of experience so the company is always looking to customer behaviour changes. With EV evolution in mind, Alimentation Couche-Tar is planning to add EV charging stations at its convenience store locations in the US and Canada. The company is doing the same in Norway as well. This kind of roll out wouldn’t be possible without a vast network of retail stores.

2. National Bank (NA.TO)

Some Canadians may not be are aware of National Bank because it is heavily concentrated in Quebec. But it might come as a surprise that National Bank is the sixth largest bank in Canada with Quebec contributing 62% of its revenues.

If you look at the ten year price chart, you’ll notice that NA has done really well when it comes to share price. Furthermore, NA ha also continued to increase its dividends at a good rate.

In the last few years, National Bank has been expanding to the rest of Canada to capture additional growth. Being a smaller bank compared to the Big Five Banks, National Bank has grown by focusing on the capital market and wealth management. 

  • Sector: Financial Services
  • Dividend Yield: 3.11%
  • Dividend Payout Ratio: 46%
  • PE Ratio: 14.77
  • 5 Year Dividend Growth Rate: 8.5%
  • Dividend Increase Streak: 11 years

I picked National Bank as one of my best Canadian dividend stocks mostly because it’s a smaller player compared to the Big Five Banks. Being a smaller bank, National Bank can adopt strategies and changes a bit quicker. For example, National Bank opened private banking branches in Western Canada to capture additional growth. The bank is also leaning on new technologies to serve the younger client base and improve company efficiency. Being a smaller bank allows National Bank to maneuver and implement changes at a fast pace than its competition and this can be viewed as a key advantage. 

Like other Canadian banks, National Bank put aside a lot of money in 2020 to protect themselves in case of loan defaults. As it turned out, not as many loans defaulted, resulting better than expected earnings for NA. I think National Bank is posed to continue to do well once the global pandemic comes to an end.

3. TD Bank (TD.TO)

Toronto-Dominion Bank is a Canada-based bank, which operates in North America. TD is one of the largest banks in Canada and the 5th largest bank in North America. It is an online financial services firm, with over 14 million online and mobile customers. Its segments include Canadian Retail, U.S. Retail, Wholesale Banking and Corporate. TD has also a large retail presence with more than 2,300 retail locations across North America. No wonder I see so many TD branches all over Vancouver!

  • Sector: Financial Services
  • Dividend Yield: 3.65%
  • Dividend Payout Ratio: 48.1%
  • PE Ratio: 13.18
  • 5 Year Dividend Growth Rate: 9.8%
  • Dividend Increase Streak: 10 years

I like TD as one of the best Canadian dividend stocks because of its readily available banking branches. You can easily spot TD branches walking around any major Canadian and US cities. TD gets more than 30% of its net income from the American division, and has more than 1,250 retail locations in the US. So the company is well diversified outside of Canada.

I became a TD customer when my parents opened up a chequing account for me with TD when I was a teenager. Since then I have opened TFSA with TD , used credit cards from TD Bank, and continued to use TD. Fortunately for TD, most people are like me. When they open an account with a particular bank, they tend to continue banking with this particular bank. More often than not, it’s not worth the hassle to switch your bank or closing your account. 

TD has seen a nice run up in share price since March 2020. Signs are pointing that this run up will mostly continue.

4. Enbridge (ENB.TO)

Enbridge is one of the leading North American infrastructure companies with a vast network of pipelines. Since our reliance on natural gas and crude oil aren’t going away anytime soon, we will need to continue to rely on Enbridge’s pipelines to transport these valuable assets across North America. This should result in Enbridge to continue to grow its earnings and revenues for years to come.

  • Sector: Energy
  • Dividend Yield: 7.15%
  • Dividend Payout Ratio: 106.9%
  • PE Ratio: 14.96
  • 5 Year Dividend Growth Rate: 11.7%
  • Dividend Increase Streak: 25 years

Enbridge has been re-investing money to update Line 3 and Line 5 to improve efficiency. Many of the Eastern US states and Canadian provinces rely heavily on Line 5. For example, Line 5 provides 45% of Wisconsin, Indiana, Ohio, Pennsylvania, Ontario, and Quebec’s gas, diesel, jet fuel, and propane.

Some investors may look at Enbridge’s 7% yield and over 100% payout ratio and think the dividends are not sustainable. However, if we look at ENB’s cash flow, the dividend payments should be safe.

5. 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.

Royal Bank is the largest bank in Canada with mover than 620,000 clients. If we look at Royal Bank’s earnings, 45% came from personal & commercial banking, 24% came from capital markets, 19% came from wealth management, 7% came from insurance, and 5% came from investor & treasury services.

  • Sector: Financial Services
  • Dividend Yield: 3.57%
  • Dividend Payout Ratio: 53.5%
  • PE Ratio: 15
  • 5 Year Dividend Growth Rate: 7.9%
  • Dividend Increase Streak: 10 years

Royal Bank has been paying dividends since 1870 and has never missed a dividend payment since. Needless to say, the 150 years of dividend payment streak is pretty impressive. And dividend investors can count Royal Bank to continue paying dividends whether it’s a bull market or a bear market. 

6. 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: 2.07%
  • Dividend Payout Ratio: 45.5%
  • PE Ratio: 22.02
  • 5 Year Dividend Growth Rate: 9.4%
  • Dividend Increase Streak: 16 years

The PE ratio is a bit high for value investors that typically look for stocks that have less than 20 PE ratio. But some stocks will continue to be expensive. If we look at the historical price chart, we will see that Intact Financial stock price has been on quite a nice run-up since the financial crisis. In fact, in the last five years, Intact Financial has provided a return of 68.27%. The good stock price appreciation is one of the key reasons why I picked Intact Financial as one of the best Canadian dividend stocks. 

7. Algonquin Power & Utilities Corp (AQN.TO)

Algonquin Power & Utilities Corp. is a diversified Canadian renewable energy and regulated utility conglomerate with assets across North America. Algonquin actively invests in hydroelectric, wind and solar power facilities, and utility businesses (water, natural gas, electricity), through its two operating subsidiaries: Liberty Power and Liberty Utilities.

  • Sector: Utilities
  • Dividend Yield: 4.46% 
  • Dividend Payout Ratio:  44.7%
  • PE Ratio: 10.56
  • 5 Year Dividend Growth Rate: 10.0%
  • Dividend Increase Streak: 10 years

I picked AQN.TO as one of the best Canadian dividend stocks because renewable energy is becoming more and more prominent. I particularly like that Algonquin Power has been actively investing in renewable energy facilities and increasing its renewable capacity through active acquisitions.

Best Canadian Dividend Stocks - AQN.TO

AQN’s share price has been trending down since mid February. This appears to be a macro trend as many Canadian renewable energy stocks have been trending down. Given that renewable energy stocks had a fabulous performance in 2020, the recent share price dip is probably slight market correction.

8. Telus (T.TO)

Telus is one of the big three Canadian telecommunication companies based in Vancouver BC. The Company provides a range of telecommunications services and products, including wireless and wireline voice and data. Telus has around 11 million subscribers and they have increased its dividend nearly every year since 2002.

  • Sector: Communication Services
  • Dividend Yield: 4.83%
  • Dividend Payout Ratio: 98%
  • PE Ratio: 27.69
  • 5 Year Dividend Growth Rate: 7.1%
  • Dividend Increase Streak: 17 years

Since the launch of smartphones and data plans, more and more Canadians are addicted to these smart devices. This addiction has helped Telus to continue making a 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. 

Having said that, Telus has been expanding outside of its core telecommunication services by offering services like telehealth, home security, and TV services. One thing I liked about Telus is that it has stayed true to its communication services core competency rather than trying to expand media services like radio and TV shows. 

With the IPO of Telus International, we can see that Telus is now spinning off some of its internal businesses as a way to generate more revenues. The success of Telus International so far sets up a bright future for the eventual IPO of Telus Health.

9. 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. Fortis serves many different regions, including Arizona, BC, Alberta, New York, Newfoundland, Ontario, PEI, and the Caribbean’s.

  • Sector: Utilities
  • Dividend Yield: 3.65%
  • Dividend Payout Ratio: 77.6%
  • PE Ratio: 20.63
  • 5 Year Dividend Growth Rate: 6.8%
  • Dividend Increase Streak: 47 years

I like Fortis for its long dividend increase streak and the consistent sustainable cash flow. Furthermore, 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.

One thing I like about Fortis is that the company is trying to reduce its carbon footprint and increase its exposure to renewable energy. For example, Fortis has established a corporate-wide carbon emission reduction target of 75% by 2035 compared to 2019 levels. It also plans to increase its renewable energy assets to 7% by 2035. 

Since Fortis has a big footprint in Canada already. I would expect Fortis to continue expanding by acquiring utility companies in the US. 

10. 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: 1.81%
  • Dividend Payout Ratio: 51.3%
  • PE Ratio: 28.57
  • 5 Year Dividend Growth Rate: 13%
  • Dividend Increase Streak: 25 years

What I like about CNR is that the company is very diversified. No one particular product line accounted for more than 25% of the total revenues. And the company has one of the lowest operation ratios of all American railway companies that are publicly traded.

Canadian National Railway has a pretty low dividend yield, but the company has had a relatively high dividend growth rate over the last 5 years. It also has a 10 year dividend growth rate of 15.6% and a 15 year dividend growth rate of 15.9% and a 20 year dividend growth rate of 16%.

The dividend increase streak has been impressive to say the least. The company definitely rewards its shareholders by consistently raising dividends. For example, if you had purchased the stock 10 years ago, you would be looking at a sizable stock price appreciation as well as a solid yield on cost number.

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 bring profits to shareholders.

As a dividend investor who cares both dividend growth and capital appreciate, I really like CNR has consistently outpaced the market.

Best Canadian Dividend Stocks – Final Thoughts

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

Want to learn construct your own dividend investing portfolio and start investing in dividend paying stocks? I went through several methods on how I shortlist and screen dividend paying stocks. You may also want to take a look at this Canadian Dividend Calendar to see when the Canadian dividend all stars pay out dividends.

The math behind this correlation of high payout ratios and future dividends is fairly straight forward. If a company fully matured, and it is unlikely to a high jump in the share price (likely to just rise with inflation), plus they are already paying out much of their free cash flow (instead of reinvesting it to create value), then it follows there will be much less fiscal room to reward investors going forward.  

Given the global pandemic, I expect the likes of Fortis, Intact Financial, Telus, Canadian National Railway, and Algonquin Power & Utilities Corp to continue raising their dividends. But I do not expect any of the Canadian banks to increase dividend payout until at least 2022. But since the Canadian banks have a higher than historical dividend yield currently, dividend investors like us can buy the stock and wait for a couple of years for dividend increase. 

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In case you’re curious, for diversification outside of Canada, we hold a handful of US dividend paying stocks. In addition, we utilize one of the low cost ex-Canada ETFs like XAW to diversify our portfolio internationally.

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

Want to learn more about how to analyze dividend stocks? Make sure you check out this comprehensive guide on how to read annual and quarterly reports.

The dividend-growth lovers over at Million Dollar Journey have their own list of Canada’s best dividend stocks, which focuses heavily on earnings-per-share, and forward earnings-per-share as their main dividend stock valuation metrics. This again, makes intuitive sense from a dividend-growth perspective, as companies that have a lot of free cash flow – plus a history of raising their dividends – should be ideally positioned to keep those dividends growing far into the future.

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.

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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103 thoughts on “Best Canadian Dividend Stocks for 2021 -My top 10”

  1. XUT looks like a decent high-dividend utility ETF. It misses out on Banks, Oil, Telecomm, and CNR but I invest in those stocks individually (e.g., ENB, CP, CNR, Telus, BNS).

    Reply
    • XUT charges a 0.62% MER to hold only ten stocks. Three stocks make up 45% of the ETF. I have always used this ETF as the example of the situation where the fund company offers no value to the investor. My opinion would be different if the MER were 0.10%.

      What the ETF does offer is a tidy list of Canadian utility stocks from which to start one’s research. That’s a plus!

      Reply
      • Fair enough, those are good points. As you suggest, it provides a good list (as does ZUT) and convenient for the lazy investor.

        Reply
  2. Thanks for telling me about your thoughts that you think what the best top 10 stocks of your dividend investing in canada. I am South Korean. I was looking for someone who I can learn. I was doing dividends investing in South Korea like you. I am happy to find you from google internet.

    Reply
  3. Greetings from Europe (Denmark)
    Thanks for a great page, and your Canadian top 10 dividend stocks
    There was certainly some interesting Canadian dividend stocks that I didn’t have in my portfolio.
    keep up the great work 🙂

    Reply
  4. Hi Bob, thanks for giving us your thoughts.

    How would you adjust this Top 10 list in an inflationary environment? i.e. buy, hold or sell?

    Reply
  5. Great list. What are your thoughts on some REITs, especially those growing their dividends like CAR or AP? Also thoughts about JWEL, MG and ARE?

    Reply
    • REITs are good to hold but you need to personally determine the portfolio composition. My latest list doesn’t include any REITs because I think there are better dividend stocks to hold than REITs right now.

      Reply
  6. Hi Tawcan: I own Merck Stock, but hate the withholding tax ($100 in 2020). Can’t move it into an RRSP because I am 75. Should I sell Merck and buy some of your recommendations to hold in my TFSA, e.g., Alimentaire Couche-Tard, or IFC? I am looking for a high dividend because I need them to live on at my age. I hold all the Can. banks in my TFSA so am not looking for a bank stock. Love your blog. Lula in Toronto

    Reply
  7. Hello Bob!

    I’m glad to have found your website. I enjoyed some of your articles and even learned a couple of things. Thanks for making it!

    I stumbled upon it by researching some specific info online that I still havent found. I was wondering if you knew the answer:

    I want to invest in ENB using my margin account. For some weird reason, my USD account gives me much more margin than my CAD account. So, I want to purchase the stock in the NYSE.

    I need to know if I can still deduct the loan interests from my taxes. It’s still a Canadian corporation, but I’ll be purchasing it in the US stock market.

    Do you know if this is possible? Can’t find anything online with information about this specific case.

    Also, I believe the 15% tax withheld in the US can be recouped via foreign taxes declaration in my CRA return. Do you know if this is correct?

    Thanks so much for your insights!

    AL

    Reply
    • I think it’s possible. The 15% withholding tax is only applicable to US companies so you should be OK with ENB. But better to double check with your broker first.

      Reply
  8. Oh, I just seems to have found the answers to my questions! 😀

    “So if a Canadian like you, Peter, owns U.S. investments that have been subject to withholding tax of 15% (dividends) or 10% (interest), that income still needs to be declared on your Canadian tax return. However, you do get to claim the foreign tax already withheld. CRA allows you to claim a foreign tax credit for foreign tax paid in order to avoid double taxation of the income.
    (…)
    Of note is that Canadian dividends qualify for a reduced tax rate due to something called the dividend tax credit. U.S. dividends are taxed at a higher rate (unless you own Canadian companies that are listed on a U.S. stock exchange – many companies are inter-listed).”
    (Source: https://www.moneysense.ca/save/taxes/filing-taxes-u-s-investments-canada/)

    According tot he above, it seems indeed I can deduct the interests from taxes, recover the 15% withheld tax on dividends, and the dividends would benefit of the CRA tax credit 🙂

    😀

    I would love to have your comments/confirmation on this topic, anyway.

    Cheers!

    Reply
  9. Great blogs! can you talk more or have a good reference on the tax advantages or disadvantages of investing in dividend stocks vs buying stocks for capital gain?

    Reply
    • Thank you Vince. It’s a bit more complicated than a few points though. Dividends are generally pretty tax efficient. Capital gains too. It really depends on your income level/tax bracket and your overall investment strategy. Sorry I couldn’t provide a more direct answer.

      Reply
  10. Love your blog, it’s got so many useful information and helps me a lot.
    Would it be still a good decision to buy some of those Canadian banks’ stocks since the prices look pretty high thesedays. For those starting to build their dividend portfolio for the first time, would it be better to wait for the adjustment or just go get started? Thanks Bob!

    Reply
    • Thank you Bryan, I appreciate your kind words.

      Yes some Canadian banks are at all time high price, but you need to compare them to the historical PE rather than just look at the price alone. I do think Canadian banks are solid investments and we plan to continue buying more shares via DRIP.

      Reply
      • Thank you for the reply Bob and also thanks for reminding me with PE.
        I am trying to build a solid portfolio with annual dividend yield of 4% plus some more and it is pretty sad to miss the perfect time to invest in canadian banks last year with great bargain. Thanks again Bob!

        Reply
  11. Thanks for your blog site. It is very informative and inspiring. What’s your review for Capital Power (CPX)? Why not included in your top 10 list?

    Reply
  12. Hey Bob,

    Great post as always. I own a lot of the top 10 of yours however I have been accumulating PKI since around 2003 – I remember backing up the truck in 2008 after the crash for $5 per share. Why ATD.B and not taking a look at PKI… Have you looked at PKI?

    Have a great day!

    Charles

    Reply
    • Thanks Charles. Nicely done on backing up the truck and buying at $5 per share, you’ve done well.

      I didn’t consider PKI because the 5 year dividend growth has been low (<5%) and it cut its dividends in 2011.

      Reply
  13. I have added to all of them this year. I was adding AQN since around 21. Hopefully it’s bottomed out now. Just added some CNR this morning. Curious about your thought between CNR and CP? Why do you think CNR is better than CP? For past few years, CP outperformed a lot than CNR. Regret to death that I have sold CP at $300 which I purchased around $200. I thought it was a very nice run and want to lock the profit. Turned out I left lots of money on the table.

    Feel I have enough Canadian Dividend Growth stocks for now. I am focusing on adding more US stocks, but they are all very expensive. Was tempted to add MSFT and AAPL the past week, but didn’t pull the trigger, now they are all back up………..

    Reply

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