Best Canadian Dividend Stocks for 2020 -My top 10

What are some of the best Canadian dividend stocks that a dividend investor can own? For many investors, dividend stocks remain to be attractive due to the stable dividend payments. In today’s low interest rate environment, owning a handful of dividend paying stocks that pay stable and uninterrupted dividends is very attractive. This is one of the reasons why we plan to live off on dividends when we are financially independent.

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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. 

Purchasing Canadian dividend stocks does not involve 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. Furthermore, we only want to own US dividend stocks in RRSP to avoid the 15% withholding tax on dividends. Due to RRSP contribution limits, we can’t simply add cash to our RRSPs and not consider the contribution limits. 

By now, you should all know that the stock market goes up and down on a daily basis. 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. 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 is my top 10 list of best Canadian dividend stocks. 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. 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. Afterall, we are investing for the long term, not short term.

1. National Bank (NA.TO)

National Bank is the sixth largest bank in Canada. National Bank’s key market is in Quebec as 62% of its revenues came from this province but the bank has expanded to the rest of the country in recent years. Being a smaller bank compared to the Big Five Banks, National Bank has managed to grow by focusing on the capital market and wealth management. 

Best Canadian Dividend Stocks - National Bank
  • Sector: Financial Services
  • Dividend Yield: 3.93%
  • Dividend Payout Ratio: 47.3%
  • PE Ratio: 12.02
  • 5 Year Dividend Growth Rate: 7.2%
  • Dividend Increase Streak: 10 years

I picked National Bank as one of my top 10 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. 

One thing to be careful with National Bank is it is more vulnerable to Quebec’s economy. If Quebec’s economy isn’t doing well, National Bank’s revenues may be greatly impacted.

Due to the COVID-19 global pandemic, it is probably unlikely to see a dividend raise until early 2022. However, At an initial dividend yield of almost 4%, dividend investors can invest in National Bank and wait for an eventual dividend raise.

2. TD Bank (TD.TO)

Toronto-Dominion Bank is a Canada-based bank, which operates in 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: 4.99%
  • Dividend Payout Ratio: 61.2%
  • PE Ratio: 12.28
  • 5 Year Dividend Growth Rate: 9.5%
  • Dividend Increase Streak: 9 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. Interestingly TD gets more than 30% of its net income from the American division, so the company does not rely on the Canadian division as heavily as some might have thought.

My parents opened up a chequing account for me with TD when I was a teenager. Since then I have opened TFSA with TD and used credit cards from TD Bank. When it comes to customer loyalty, most people are just 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. This is why I like the banking sector so much.

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: 4.41%
  • Dividend Payout Ratio: 55.5%
  • PE Ratio: 12.61
  • 5 Year Dividend Growth Rate: 7.5%
  • Dividend Increase Streak: 9 years

Yet another Canadian bank on our 10 best Canadian dividend stocks (do you see a trend?). 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.

Like the other Canadian banks on this Best Canadian dividend stocks list, I do not expect Royal Bank to raise its dividends until at least early 2022 because of the global pandemic. Like other Canadian banks, Royal Bank has put aside a huge amount of money in case of any loan defaults. We probably won’t see the full financial impact of the COVID-19 pandemic until mid 2021. However, considering the high initial yield of over 4%, one can afford to wait a dividend increase.  

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: 6.47%
  • Dividend Payout Ratio: 63.6%
  • PE Ratio: 9.83
  • 5 Year Dividend Growth Rate: 6.4%
  • Dividend Increase Streak: 9 years

Bank of Nova Scotia is the most diversified Canadian bank out of the big five. It provides financial services not just in the Americas but Asia-Pacific as well. In fact, Bank of Nova Scotia has branches and has tens of millions of assets in Latin American, Europe, and Asia. It is a truly international bank.

While more diversification is great, Bank of Nova Scotia has seen poor performance in Latin America in recent years. I believe Bank of Nova Scotia may continue this subpar performance compared to the other Canadian banks for the next few years. The stock price has reflected the recent poor performance. For long term dividend investors, the depreciated stock price in relation to the PE and PEG ratios, may provide a good opportunity, especially considering the high dividend yield the stock can provide. 

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: 2.33%
  • Dividend Payout Ratio: 62.8%
  • PE Ratio: 26.92
  • 5 Year Dividend Growth Rate: 9.6%
  • Dividend Increase Streak: 15 years
Best Canadian Dividend Stocks - Intact Financial price chart

At a PE ratio above 25, Intact Financial is a bit overpriced. I believe the high PE ratio is caused by the market putting a slight premium on this particular stock. 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 54.68%. The good stock price appreciation is one of the key reasons why I picked Intact Financial as one of the best Canadian dividend stocks. 

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).

Best Canadian Dividend Stocks - Saputo Canadian brands
Some of the Saputo Canadian brands

Saputo’s products are sold in several countries under well-known brand names such as Saputo, Alexis de Portneuf, Armstrong, COON, Cracker Barrel, Dairyland, DairyStar, Friendship Dairies, Frigo Cheese Heads, La Paulina, Milk2Go/Lait’s Go, Neilson, Nutrilait, Scotsburn, Stella, Sungold, Treasure Cave and Woolwich Dairy. Maybe you aren’t aware of the name Saputo, but you probably are aware of one of these brand names mentioned above.

  • Sector: Consumer Defensive
  • Dividend Yield: 2.13%
  • Dividend Payout Ratio: 47.1%
  • PE Ratio: 22.11
  • 5 Year Dividend Growth Rate: 6.5%
  • Dividend Increase Streak: 20 years

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 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.

Best Canadian Dividend Stocks - Telus
  • Sector: Communication Services
  • Dividend Yield: 4.84%
  • Dividend Payout Ratio: 99.6%
  • PE Ratio: 20.59
  • 5 Year Dividend Growth Rate: 8.2%
  • Dividend Increase Streak: 16 years
Best Canadian Dividend Stocks - Telus
Telu’s 2020 Targets

Canadians are addicted to smartphones and data. This will allow 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. This is why Telus is exploring other telecommunication services to grow its revenue.

One of the reasons for the high payout ratio is that Telus is investing money in the new 5G infrastructures. Telus is also expanding other segments like home security, health, TV, and internet. 

Another thing note is that Telus board of directors appears to be very shareholder friendly as they announced a number of years ago their dividend growth policy – to target “ongoing semi-annual dividend increases, with the annual increase in the range of 7 to 10% from 2017 through to the end of 2019.” As a dividend growth investor, that’s music to my ears.

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: 3.6%
  • Dividend Payout Ratio: 71.6%
  • PE Ratio: 19.62
  • 5 Year Dividend Growth Rate: 7.4%
  • Dividend Increase Streak: 46 years

I included Fortis as one of the top Canadian dividend stocks because of its long dividend increase streak. 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.

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: 1.62%
  • Dividend Payout Ratio: 47.3%
  • PE Ratio: 29.22
  • 5 Year Dividend Growth Rate: 16.5%
  • Dividend Increase Streak: 24 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. 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.

If we look at CNR’s 10-year dividend growth history, Canadian National Railway has raised dividends on average by 15.6%. This is an impressive feat. The overall stock dividend yield has been below 2% the last 10 years. This means, if you had purchased the stock 10 years ago, you would be looking at a heafy stock price appreciation as well as a solid yield on cost number.

10. 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: 4.35% 
  • Dividend Payout Ratio:  78.5%
  • PE Ratio: 18.06
  • 5 Year Dividend Growth Rate: 9.8%
  • Dividend Increase Streak: 9 years
Best Canadian Dividend Stocks - AQN.TO
Best Canadian Dividend Stocks - AQN.TO

Given that renewable energy is becoming more and more prominent, I like that Algonquin Power has been actively investing in renewable energy facilities and increasing its renewable capacity through active acquisitions. 

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.

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.  

In the midst of a global pandemic, it will be interesting to see how many of these top 10 Canadian dividend stocks continue to raise their dividend payouts. If I have to bet money on it, I can see the likes of Fortis, Intact Financial, Saputo, Telus, Canadian National Railway, and Algonquin Power & Utilities Corp to continue raising their dividends. For the Canadian banks mentioned above, I would expect no more dividend increases until at least 2022.

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.

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.

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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44 thoughts on “Best Canadian Dividend Stocks for 2020 -My top 10”

  1. 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
  2. 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
  3. 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
  4. 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
    • 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
  5. 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
  6. 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
  7. 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
    • 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
  8. 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
    • 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
  9. 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
  10. 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
    • 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
  11. 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
  12. I have been studying stock market since 2 months and to me all the share price are inflated. I have been thinking of buying Fortis and some banks’ shares but not sure if I should do it now or wait it out a bit till january, 2018.

    Reply
  13. Just discovered your blog. Really enjoying the content thus far. Well done! Do you think utilities (FTS, EMA, etc) and REITs will be impacted in this rising rate environment? Would you still acquire new shared in those interest sensitive sectors at this time?

    Thanks
    Stephan

    Reply
    • These dividend stocks will be negatively impacted by the rising interest rate, but we also need to remember all of these companies have survived the higher interest rate environment. I think in the long run they’ll come out just fine.

      Reply
  14. Hello Tawcan,

    First of all congratulations for your blog, I follow you from Spain!

    I was struck by the fact that you do not have the “Brookfield Infrastructure Partners” in your portfolio. I have read that it is considered a great share, and I would like to know your opinion if it is possible and why you do not have it in your portfolio.

    THANKS AND GREETINGS!

    Reply
  15. Hi Bob,

    Great selection of Canadian top 10 dividend stocks. I’ve only got Bank of Nova Scotia (BNS) on your selection. I’ve owned some of these lists in the past (TD, CNR, FTS and SAP) but sold and restructured my dividend portfolio to monthly dividend income. I have also narrowed down my lists to 6 for now from around 13-14 stocks and who knows may add again some dividend growth stocks in the future.

    Is Enbridge (ENB) in your radar and if not do we know why? Thanks.

    Reply
  16. I am already very overweight BNS and TD , especially since March of this year. I’ve been adding to both especially BNS because of the high yield. But I’ll be adding to existing utility positions going forward the next few months.

    Reply
  17. Thanks for the list and the exact data I look at: P/E, Ratio, Yield, Increase rate, and length of rises. Since the downturn this spring, I added debt/Capital ratio to what I look at.

    I put Royal Bank on my watch list now. I already own TD, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial.

    cheers!
    John

    Reply
  18. Thanks, tawcan. Great list. I would like a little more diversification. I think MRU is a pretty good dividend growth stock. Personally I would prefer MRU over SAP. SAP was a disappointment to me, especially when comparing to SYY in the US.

    Looks like you don’t like pipelines any more. ENB at $40 is pretty tempting to me.

    Reply

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