One of the best ways to increase the value of your stock portfolio while protecting it from adverse market movements is to add Canadian dividend stocks that will provide you with income in any market environment. Dividend stocks are extremely popular for new investors learning how to invest in stocks.
That is why we have completely overhauled this list of the best Canadian dividend stocks for 2020 to be relevant for investors in June.
Be careful though, stocks that have unusually high dividends need to pay these rich premiums to attract investors and most of the time these dividend companies are unstable. These aren’t exactly the best stocks to buy and hold as their dividend payouts will eventually catch up to them and their share price will start to drop.
Therefore it’s prudent to build your dividend producing portfolio with stocks that are not overvalued, and likely to hold up in adverse market conditions.
Canadian Dividend stocks are an excellent way to diversify your portfolio
While the notional value of the dividend is important, the dividend yield will provide you with the best gauge of your return on investment. An investor can calculate dividend yield by dividing the yearly dividend by the stocks price.
While there is a multitude of sectors in the Canadian market the economy is dominated by oil and gas producers, pipeline and storage companies, major financial institutions, and investment management trust companies. Still, each of these sectors has risks.
Therefore if you would like to avoid direct exposure to oil and gas risk, you should avoid oil and gas stocks and stick to pipeline and storage companies which produce income like toll operators. Banks and insurance companies along with real-estate investment have exposure to changes in interest rates, as well as swings in their own riskier investment businesses.
Canadian dividend stocks simply hold up in sub-par market conditions
- Management has to be particularly frugal when they are forced to give out a dividend
- Dividend-paying companies tend to have more earnings
- During a market crash, an attractive dividend yield often makes investors keep purchasing dividend stocks, saving the price
There is no doubt dividend stocks have a place in every investor’s portfolio. These aren’t necessarily the highest paying dividend stocks, but you can run into trouble looking only for high yields. These are simply the best and safest dividend stocks you can own on the TSX today.
This list takes 3 key factors into consideration. The growth, safety and current yield of the dividend. A high yielding dividend stock may be placed lower on this list due to safety, and a low yielding dividend stock could be placed high on this list due to the company’s dividend growth.
This mid year update also has one important factor tied in to our rankings, and that is the COVID-19 crisis. Stocks that are defensive in nature and more reliable during economic downturns have saw an increase in ranking. You’ll also notice that tech stocks are becoming more prominent on the list, as we are seeing how important it is during times like this.
Just because a stock is listed high on this list doesn’t necessarily mean it is a poor dividend stock. Remember, there are over 3000 stocks trading on the TSX and the TSX Venture. This is only 32 of them.
This article also has contributions from some excellent Canadian bloggers. You’ll see links in the stocks they’ve suggested, as well as bios at the bottom of the pages.
**Writer Daniel Kent is long TFII.TO, CNR.TO, ADW.A, FSZ.TO, ENB.TO, T.TO, FTS.TO, RY.TO, TD.TO and CNQ.TO
Canada’s Top Canadian Dividend Stocks for 2020 (Rankings, metrics, research updated May 21):
32. Magna International (MG.TO)
Magna International (TSX:MG) is one of the world’s leading automotive part suppliers. It has operations worldwide with over 320 manufacturing facilities and 100 development and research centers across 30 countries.
The company is well diversified, which allows it to better handle the cyclical nature of the auto industry. The company is low leveraged, which means it is well positioned to make significant acquisitions and acquire new customers.
A Canadian Dividend Aristocrat, Magna International has raised dividends for 10 straight years, and has one of the better dividend growth rates out of the companies on our list of the best Canadian dividend stocks. Magna is growing its dividend at a 13% rate annually over the last 5 years, and its payout ratio of 25% leaves plenty of room for outsized growth moving forward.
The dividend is well covered by free cash flows, using up only 20%. The company has a yield of 4.11% at the time of writing. Even though Magna is better equipped to handle a cyclical industry, its stock price is still prone to swings. Especially as the economy sputters, like it’s doing today.
YTD Gain: -25.24%
Payout Ratio: 26.12%
1Yr Target Price: $62.08
31. Canadian Natural Resources Ltd (CNQ.TO)
Canadian Natural Resources (TSX:CNQ) is a Canadian oil and gas company that prides itself in being a low cost producer with a strong balance sheet.
The company has been buying up Canadian oil assets at a rapid pace, taking advantage of a weakened oil market. In 2017, the company purchased Shell’s Canadian oilsands assets and in early 2019 acquired all of Devon Energy’s North American oil assets. Because of the recent bear market, a lot of oil and gas stocks are providing extremely lucrative dividends right now, and Canadian Natural is definitely one of them.
To start, there is a multi-decade long history of dividend growth as Canadian Natural has raised dividends for 24 straight years. The company’s dividend makes up only 62% of free cash flows and currently yields 6.58%.
It is one of the fastest growing dividends in the oil and gas sector, with a 5 year dividend growth rate of just over 10%.
We eliminated all other oil and gas producers from this list due to dividend cuts. However, Canadian Natural actually stated the company is maintaining the dividend for now. As a result, we’ve decided to keep the company on the list, albeit low, as it provides and excellent yield and price point for investors who want to enter the oil and gas industry.
It’s important to temper expectations and to not be surprised if a temporary dividend cut does happen however, as oil and gas companies are under an immense amount of pressure.
YTD Gain: -38.19%
Payout Ratio: 33.04%
1Yr Target Price: $33.50
30. Canadian Pacific Railway (CP.TO)
Once a Canadian Dividend Aristocrat, CP Rail (TSX:CP) entered a rough patch at which point it kept its dividend steady for a number of years. As a result, it lost its status as a dividend growth stock. This is exactly why you’re going to see Canada’s other railway, CN Rail, rank significantly higher on this list.
CP Rail has however, been successful in getting itself back on track.
The company began raising dividends again in 2016 and it now has a four-year dividend growth streak. Over that period, its dividend has more than doubled climbing to $0.83 from $0.35 per share. Like others low on this list, CP Rail lacks the yield (0.98%) to make it one of the better Canadian dividend stocks, but with its dividend only taking up 34% of free cash flows and a 5 year dividend growth rate of 17%, there is room for the dividend to grow.
It’s most recent increase was even better, with an increase of 25%.
The company’s stock price has also more than doubled over the last 3 years. So although the yield is low, investors have been rewarded with strong capital appreciation.
YTD Gain: -3.4%
Payout Ratio: 19.07%
1Yr Target Price: $345.30
29. Sun Life Financial (SLF.TO)
Sun Life Financial (TSX:SLF) continues to impress us, and provides a solid dividend for Canadian investors looking for income.
Sun Life Financial is a holding company that has subsidiaries that are active in the financial service space. Through its subsidiaries, Sunlife offers a range of insurance products along with wealth management instruments to individuals and corporations. Its head office is in Toronto and the company had net income of $2.5 billion over the last 12 months.
Sun Life is a global organization and has operations in Asia, Europe, and North America. Sun Life performs better as interest rates begin to rise. This is because they have a difficult time generating enough revenue to cover insurance policies when interests rates are unusually low.
At this time the organization boasts a solid 4.69% dividend yield, making this an attractive addition to your dividend portfolio. The company has raised dividends for 5 straight years, qualifying it for Canadian Dividend Aristocrat status and has a 5 year dividend growth rate of 5%.
Its slower growth is what has caused it to fall on our dividend stock list. Shares have also fallen lately on fears of COVID-19 deaths impacting the insurance side, as well as low interest rates depressing returns from the fixed income portfolio.
If you’re bearish on the economy, Sunlife and our next stock may be watchlist candidates for now. But that doesn’t change the fact their dividends are excellent.
YTD Gain: -27.6%
Payout Ratio: 47.73%
1Yr Target Price: $64.27
28. Manulife Financial (MFC.TO)
Manulife (TSX:MFC) has had somewhat of a resurgence. After years of dividend stagnation, Manulife has once again become a reliable dividend growth company. Manulife raised its dividend twice in 2018. It is important to note however, that Manulife never raised its dividend in 2019.
However, the company’s second raise in 2018 didn’t take effect until the first quarter of 2019.
Once forgotten, insurance companies made a comeback due to rising interest rates. However, entering a cycle of lower and stagnant interest rates, both Sunlife and Manulife have fallen on this list of top dividend stocks. Over the past five years, Manulife has grown core earnings by a compound annual growth rate (CAGR) of 15%.
Asia has been a bright spot for Manulife. Asia new business value has grown at a CAGR of 38% since entering the market in 2014. Manulife currently yields 6.91%, and has double digit 1 and 5 year dividend growth rates, coming in at 13% and 11% respectively.
However, we’d take an investment in Manulife with caution right now. Low interest rate environments like the one’s we are seeing have a negative effect on insurance companies. For one, they tend to re-invest premiums to generate cash flows. Because rates are low, we can expect returns to be low. Secondly, the company’s products become less attractive as rates go down.
This is why we haven’t seen a recovery in Manulife’s price just yet. Investors are waiting to see how long this environment is going to last.
YTD Gain: -38.35%
Payout Ratio: 36.10%
1Yr Target Price: $26.63
27. Brookfield Asset Management (BAM-A.TO)
Brookfield (TSX:BAM.A) is synonymous with quality and one of the world’s premier asset management companies. BAM has $250 billion+ in assets under management in 30+ countries.
Brookfield has assets under four segments; Real Estate, Infrastructure, Renewable Power, and Private Equity. BAM also has a very impressive compound annual shareholder return over time and is targeting 10-15% annualized growth going forward.
Brookfield has over $30 billion of invested capital which generates $1.4 billion in annualized distributable cash flow. Although BAM has one of the lowest dividend yields of all companies on the list at 1.63%, its current payout ratio of 16.94% leaves ample room for continued dividend growth moving forward.
The company has raised dividends for 8 straight years, and has a 5 year dividend growth rate of 7%. To add to this, the company’s dividend only uses up about 9% of its current free cash flows.
Along with a strong growing dividend, Brookfield has also delivered solid capital gains. At least until COVID-19 happened, anyway. You’ll find more Brookfield options later in this list, ones that provide a stronger dividend.
YTD Gain: -16.46%
Payout Ratio: 36.74%
1Yr Target Price: $59.91
26. Sylogist (SYZ.Z)
**This contribution comes from Mike over at The Dividend Guy Blog and Dividend Stocks Rock. View his bio here**
Sylogist Ltd (TSX:SYZ) is a software company that provides Enterprise Resource Planning solutions, including fund accounting, grant management and payroll to public service organizations. The company operates in only one business segment – Public Sector.
It receives maximum revenue in the form of subscription maintenance. Geographically, the company offers its services to the United States of America and the United Kingdom. The company has over 1,000 customers worldwide. Who doesn’t like a company offering overall improvements in business processes, quality and systems control through their services?
Sylogist shows strong revenue, EPS and dividend growth. It also offers surprisingly high yield for a small tech stock at 4.08%. Through their Enterprise Resource Planning (ERP) solutions, SYZ can help both public and private sectors to manage intellectual property.
Knowing how crucial data management has been for businesses recently, SYZ is at the right place at the right time. We like their client diversification reaching over 1,000 customers worldwide, including local and national government departments.
If Sylogist wasn’t trading on the TSX Venture, it would be part of the Canadian Dividend Aristocrats. In fact, it is the only stock on the TSX venture to show 8 consecutive dividend increases. The past 5 year and 10 year dividend growth rates are impressive, and management also rewards shareholders with a few special dividends from time to time. What’s not to like? Oh, did you ever wonder why such small company can pay such a nice dividend? That’s because there is no debt on the balance sheet!
YTD Gain: 10.95%
Payout Ratio: 780%
1Yr Target Price: $11
25. Andrew Peller (ADW-A.TO)
Andrew Peller (TSX:ADW.A) produces and markets wine, spirits, and wine related products.
If you are worried about its small stature and $399 million market cap, don’t be. It has a long and storied history with roots dating back to 1961. It’s one of the smallest Canadian Dividend Aristocrats and has proven to be one of the most reliable dividend growth companies in Canada.
It has raised dividends for 14 straight years, and its most recent dividend increase of 6% falls about 50% shy of its 5 year annual growth rate of 9%. Andrew Peller’s dividend is well covered by free cash flows, taking up only 41%.
Over the past five-years, Andrew Peller has grown earnings by a CAGR of 20%. Although growth is expected to slow to approximately high-single digits over the next couple of years, it doesn’t consider future acquisitions.
Since 1995, Andrew Peller has purchased and integrated 17 brand acquisitions totaling more than $200 million. As it continues to expand in adjacent categories, there is also a real opportunity in the cannabis sector. Although the company has not publicly commented, it has not shied away from expanding its product base in the past, which would only mean good things for its dividend.
“Sin stocks” like tobacco, liquor and gambling tend to perform well in a recession, and Andrew Peller’s stock price has taken a significant hit, making it a strong option for those looking for exposure to the sector.
YTD Gain: -15.91%
Payout Ratio: 37.31%
1Yr Target Price: $17
24. Brookfield Infrastructure Partners (BIP.UN)
**This contribution was made by Sabeel over at RoadMap2Retire.
Brookfield Infrastructure Partners (TSX:BIP.UN), as the name suggests, invests in infrastructure projects around the world. Brookfield provides global exposure and includes investments in transport (toll roads & railways), pipelines, port terminals, cell towers, data centers, power transmission etc.
Brookfield has a proven record to strike some of the best deals, looking for distressed assets, or investing counter-cyclical or simply paying fair price for a fantastic asset. The recent acquisition of Reliance Jio’s cell tower asset in India is a good example, which leapfrogs BIP to the forefront of the Indian infratel market.
For years, American Tower has been buying smaller chunks to build wide exposure to one of the fastest growing economies in the world and Brookfield managed to pick up a great asset in that arena. Similarly, the purchase of Genesse & Wyoming, a railroad operator, was a great infrastructure asset to own.
Last year, BIP was added to the TSX60 index and continues to be good for both growth and income focused investors, currently yielding 4.94% and a 5-yr dividend CAGR or 10.4%.
YTD Gain: -13.76%
Payout Ratio: 2871%
1Yr Target Price: $68.36
23. Canadian Imperial Bank of Commerce(CM.TO)
CIBC (TSX:CM) is the smallest Canadian big 5 bank that provides services to individuals, small businesses, commercial segments and corporate banking.
The company is actively attempting to secure market share beyond the Canadian markets, with multiple transactions south of the border. The bank is often criticized for placing too many eggs in one basket in terms of economic exposure, so it is nice to see the company actively trying to expand.
As of this moment, it remains the worst buying option out of the Big 5 banks for us. But, it is still a very strong dividend stock.
Its US acquisitions should bode well for future growth, as the Canadian personal banking market is expected to slow in the coming years. The company doesn’t have the client base like the next stock on our list, but it still has over 11 million of them. It boasts the best dividend yield out of all the major financial institutions at 7.05%. CM is a major holding in most all Canadian bank ETFs.
Much like the other Canadian banks, the stock started increasing dividends after the consequences of the 2008 financial crisis subsided, and as such it has a dividend growth streak of 9 years.
The company has been growing dividends at a rate of 7% over the last 5 years, although its most recent increase of only 5% falls well shy of its average. It also has the second highest payout ratio of Canada’s big banks at 50%.
YTD Gain: -23.01%
Payout Ratio: 50.62%
1Yr Target Price: $94.60
22. Atco Gas (ACO.X)
Atco (TSX:ACO.X) and big-brother Canadian Utilities (TSX:CU) are subsidiaries of Atco Group of Companies. With a market cap half the size of CU, Atco often gets overlooked by investors. Don’t make the same mistake. Atco is a utility company with electric, gas and renewable energy assets.
The company operates in four major segments – Structure and Logistics, Electricity, Pipelines & Liquids and Retail Energy. The company has over $21 billion in assets, making it one of the largest utility companies in the country. Atco has the fourth-longest dividend growth streak in Canada at 25 years.
Currently yielding 4.81%, the company also has an impressive 5 year dividend growth rate of 13%. Its most recent increase falls well below this at only 7%, but considering it has raised dividends for over two and a half decades, there isn’t much to worry about. Don’t expect this to change anytime soon.
Atco also has the lowest payout ratio on a trailing and forward twelve-month earnings basis. As such, expect it to return to double-digit dividend growth well into the future.
YTD Gain: -26.57%
Payout Ratio: 36.22%
1Yr Target Price: $53.50
21. Exchange Income Corp (EIF.TO)
Exchange Income Corp (TSX:EIF) provides services and equipment to the aerospace industry, and has a wide variety of services. The company provides scheduled, chartered, and emergency medivac services while also providing regional operators with aircraft, engines and other components and parts.
The company has proven to be very strong at making and integrating complimentary acquisitions. The company’s Quest facility opened up in 2019, and should be able to drive revenue and earnings growth significantly.
In terms of its dividend, Exchange Income Corp pays one of the best in the country. With a yield of 9.49%, the company looks very lucrative to income investors. And although a payout ratio of 94.23% is fairly high, the company has increased dividends consecutively for a decade now.
The company’s dividend growth isn’t anything to write home about, with 5 year annual growth of around 5% and its most recent increase falling well shy of this at 2%. If Exchange Income Corp’s dividend growth was stronger, this stock would be a top 5 play on this dividend list.
However, it is still a strong option for both stock appreciation and an excellent dividend.
YTD Gain: -46.5%
Payout Ratio: 89.46%
1Yr Target Price: $44.63
20. Cogeco Communications (CCA.TO)
Cogeco Communications (TSX:CCA) is a telecommunications company operating in Eastern Canada and the Eastern United States.
The company specializes in providing residential and commercial customers with internet and telephone services. It currently boasts a customer pool of over 1.1 million, with nearly 40% of that base exposed to the stronger US Dollar. At a quick glance, you’ll probably notice that the company’s overall customer base is declining.
However, it’s important to look a little deeper. Cogeco is slowly increasing its customer base in probably the most important sector today, internet services. As more and more people move away from television and land lines, providing fast reliable internet will be the path forward for most telecom companies.
Cogeco has a 16 year dividend streak and is growing its dividend consistently at a double digit rate with 5 year dividend growth sitting at 11%. Its most recent increase fell right in line with its 5 year history as it raised its dividend by 10%.
Its yield is only 2.33%, but investors can expect consistent growth from the company moving forward as its dividend currently only takes up 21% of its free cash flows. For those looking for options outside of the Big 3, Cogeco is an excellent option.
YTD Gain: -12.19%
Payout Ratio: 29.04%
1Yr Target Price: $110.63
19. Bank of Nova Scotia (BNS.TO)
The Bank of Nova Scotia (TSX:BNS) is one of the largest Canadian financial institutions, with a market cap of $63 billion. The financial giant has over 25 million customers and assets of nearly $950 billion. The company is working extensively on integrating previous acquisitions made over the last few years.
Scotiabank also focuses immensely on the digital banking sector, which is growing at a rapid pace. Scotiabank has struggled as of late, which is surprisingly a good thing for prospective investors.
Typically, the worst performing bank out of the Big 5 in Canada has returned over 20% to investors upon recovery. Along with this, the company is currently trading at low valuations.
The Bank of Nova Scotia is trading at less than 10 times forward earnings and 0.986 times book value. Analysts have put over 30% upside on the company, the highest of the major Canadian banks. In terms of the company’s dividend, it currently yields 6.97%, second to only CIBC in terms of Canadian banks.
However, it’s going to be important to temper expectations in wake of COVID-19 headwinds. We expect the banks to perform worse in 2020 than they did in 2019, which could hurt prices over the short term. However, this doesn’t change the fact that they are excellent dividend options for Canadians.
It has raised dividends for 9 straight years and has a 1 and 5 year dividend growth rates of 6%.
YTD Gain: -28.21%
Payout Ratio: 51.98%
1Yr Target Price: $69.25
18. Fiera Capital (FSZ.TO)
**This contribution comes from Mike over at The Dividend Guy Blog and Dividend Stocks Rock. View his bio here**
Fiera Capital Corp (TSX:FSZ) is a Canadian asset management company which offers traditional and alternative investment solutions. It provides investment advisory and related services to institutional investors, private wealth clients and retail investors.
The company offers institutional clients a complete range of traditional and alternative investment strategies through specialized and balanced mandates.
Its diverse client base includes pension funds, endowments, foundations, religious and charitable organizations as well as large municipal and university funds. The company has a presence in Canada, the United States, United Kingdom, Europe, and Asia. Fiera Capital is a fast-growing independent investment firm.
They have established a solid reputation and have grown by acquisition over the years. The investing firm recently acquired 80% interest in Palmer Capital, a UK focused real estate investment manager. FSZ offers institutional, private wealth and retail market full service. It is currently Canada’s 3rd largest publicly traded investment firm.
Fiera benefits from a stable base of clients, as 50% of them are institutional. We also like that management’s interest is aligned with shareholders as 13% of the shares in ownership belongs to Fiera employees. FSZ has increased its dividend year after year since 2013.
It shows an impressive dividend growth rate over the past 5 years, but don’t expect it to keep that pace. Starting in 2013, the firm has increased its dividend twice a year by $0.01/share each time.
Expect FSZ to slow down its dividend growth policy to mid-single digit growth going forward. With a yield of 9.42%, this is an attractive play for income seeking investors.
YTD Gain: -24.56%
Payout Ratio: N/A
1Yr Target Price: $9.00
17. TC Energy Corp (TRP.TO)
Formerly known as TransCanada, TC Energy Corp (TSX:TRP) is an energy and infrastructure company.
It owns and operates a network of gas and liquids pipelines. Its most notable asset is the Keystone pipeline. The company also has nuclear and wind generating assets in its portfolio. TC Energy has a well diversified portfolio of assets. This is one of the main reasons it is so attractive.
Because it is a pipeline company, it collects exactly like a toll operator, getting paid when it provides access to transport oil and gas to specific destinations.
The company has been stunted by regulatory issues as of late, as the Keystone pipeline has been delayed yet again. Construction has started in Alberta, but consistent delays are happening in the United States. In fact, Joe Biden recently said that if he wins the election, he plans to outright cancel the Keystone XL pipeline.
This would ultimately drag the company through a slew of lawsuits. We expect the pipeline to be built, but the uncertain future around it is why TC Energy ranks so much lower than Enbridge on this list of the top Canadian dividend stocks.
TC Energy has raised dividends for 19 straight years. With a yield of 5.43%, the company provides income investors with a high yielding, consistently increasing dividend. TC Energy is increasing dividends at a rate of 9% over the last 5 years, and its most recent increase of 8% is right in line with averages.
YTD Gain: -9.15%
Payout Ratio: 70.26%
1Yr Target Price: $75.24
16. Goeasy Ltd (GSY.TO)
Small-cap Canadian alternative lender Goeasy Ltd (TSX:GSY) makes its way up our list of the best Canadian dividend stocks primarily because of its excellent dividend growth. More on that a little bit later.
What is Goeasy all about? The company is a full service financial company that provides Canadians with alternative loan options rather than using a major financial institution. Goeasy operates over 400 stores in Canada under its two main operating segments EasyFinancial and EasyHome.
The company has recently expanded into Quebec and increased its loan offerings up to $15,000 – $30,000, which is expected to be an $18 billion market.
As more and more people head to alternatives lenders after getting rejected from major banks due to tight regulations, expect Goeasy to keep growing. In fact, along with its amazing dividend growth, Goeasy is one of the best growth stocks to own in Canada right now.
Goeasy pays a yield of 3.50% at the time of writing, which is a pretty solid yield for the company. At least compared to a few months ago. Goeasy has more than doubled its dividend since 2014, and current carries a 5 year dividend growth rate of over 29%. Its most recent increase of 37% was significantly higher than its 5 year average and I would expect more of this from Goeasy in the future.
The company has raised dividends for 5 straight years, qualifying it for Canadian Dividend Aristocrat status. Its payout ratio of only 29%, one of the lowest in the financial sector.
We can expect both top and bottom lines to slow because of COVID-19 and the inevitable economic slowdown. We will be paying close attention to Goeasy’s dividend growth rate and delinquency rate moving forward. The company has stated it can operate profitably at more than double the delinquencies however, which is a huge bright spot.
YTD Gain: -26.27%
Payout Ratio: 29.74%
1Yr Target Price: $64.32
15. Canadian Utilities (CU.TO)
**This contribution was made by Sabeel over at RoadMap2Retire.
In addition to regulated industries like electricity generation & transmission, CU owns plenty of other assets such as industrial water services in Canada, electricity generation in Mexico & Australia, real estate assets, port terminal operators etc.
It is a diversified business and is also an owner-operator business — studies have shown that owner-operator businesses provide better long term investment decisions as the management is not looking for a quick buck. CU is also a good investment for DGI-focused investors providing 5.61% in dividend yield and approx 9% in 5-yr dividend CAGR.
Canadian Utilities has moved up our list of the best Canadian dividend stocks primarily due to its price drop. In the $40 range, the company provided next to no growth, and its yield didn’t justify a purchase alone.
However, now trading in the low $30’s, there is a chance for some upside in terms of price to go along with a spiked yield due to the drop. In terms of reliability, there probably isn’t a better option in the country.
However, if you’re looking for a utility that can provide growth and yield, you’re probably better off heading to the other two options further down this list.
YTD Gain: -17.72%
Payout Ratio: 52.19%
1Yr Target Price: $39.13
14. Franco Nevada (FNV.TO)
**This contribution was made by Sabeel over at RoadMap2Retire.
Franco Nevada Corp (TSX:FNV) presents a unique situation. What if you could buy gold today for 1/3 of spot prices? You can…if you own royalty & streaming company Franco Nevada Corp.
FNV does not operate any mines, but funds the mining operators and collects royalties on the gold or silver produced (depending on the deal) at a set price, which is typically at a much lower price than the spot price. These deals allow FNV to scale their operations and diversify, without actually taking any of the mining operational risk – quite an asymmetrical risk/reward proposition.
FNV has proven over the years at very adept deals and has outperformed the gold returns. Lately, FNV has started investing in O&G assets as they see bargains — currently a small sliver of overall portfolio, which management has indicated will never cross the 20% line in the sand…so, it will still remain a very precious metals focused company over the long run.
The deals in place at FNV are in fact so good that management has to literally do nothing for the next 30 years and will still be able to generate good returns and pay dividends to shareholders. The current dividend may seem low at 1.1%, but the company consistently raises dividends year after year, while providing a good growth opportunity.
Franco Nevada has gained significant traction on this list during our mid year update due to the price of gold, and it’s expected trajectory. If gold does reach levels of $3000 an ounce, which some analysts expect, Franco Nevada will stand to benefit.
YTD Gain: +39%
Payout Ratio: 54.10%
1Yr Target Price: $154.25
13. Bank of Montreal (BMO.TO)
Bank of Montreal (TSX:BMO) is a Canadian Big 5 bank that provides a wide variety of banking services.
The company provides both commercial and personal banking along with wealth management and investment banking services. In terms of market cap, the company is currently ranked fourth out of the 5 Big 5 Canadian banks.
However, BMO has the lowest exposure to the Canadian housing market out of all the Big 5 banks, which could prove vital during the current Canadian housing slowdown. BMO has one of the longest active dividend payment streaks in the country, having paid dividends for over 186 years.
In order to fuel growth, the company will need to take advantage of its North American exposure and look to expand to other global markets. BMO currently yields 6.38%, and the dividend is considered fairly safe with a payout ratio of only 46%. The company has a dividend growth streak of 8 years and a 5 year dividend growth rate of 5%. Its most recent increase of 7% tops its 5 year average however.
Analysts expect the bank to grow at an annual rate of around 5.2% for the next five years, but depending on the true impacts of COVID-19, this could be dialed up or down.
Keep in mind, BMO was the best performing bank out of Canada’s Big 5 over 2019, in which most of Canada’s financial institutions suffered.
YTD Gain: -33.6%
Payout Ratio: 47.09%
1Yr Target Price: $89
12. Canadian National Railway (CNR.TO)
Canadian National Railway (TSX:CNR) has the prestigious distinction of being the only transcontinental railway in North America and is the second largest publicly traded railway in North America with an $81 billion market capitalization.
As we move forward into an inevitable recession, CN Rail has moved from the lower end of our list of top Canadian dividend stocks to the top 10, primarily because of its economic moat and reliability.
CN Rail is dual-traded, which means it can be traded on both the Toronto (TSX) and New York (NYSE) stock exchanges (Norbert’s Gambit being one of the more efficient ways to own the U.S. variant.)
CNR also has the distinction of being Canada’s largest-ever IPO when the company went public back in 1995. CN Rail is well diversified, with no revenue product lines accounting for more than 24% of total revenues.
Over the past 15 years, the company is also one of the most efficient railways in North America with the lowest operating ratio of all publicly traded railways.
Over the past 5 years, the company has grown revenues at an annual compound growth rate of 6%, free cash flow by 8% and operating income by 10%. More importantly, the company has increased dividends for 24 straight years at a 5 year rate of 16%. Its most recent increase of 18% is above its 5 year average, which is a positive sign.
Canadian National only has a payout ratio of 33%, but the company’s dividend makes up over 118% of free cash flows, which is something investors will need to keep an eye on. Its yield is small at 1.98%, but investors have been rewarded with both strong dividend growth and capital appreciation through its rising share price.
YTD Gain: -4.38%
Payout Ratio: 36.88%
1Yr Target Price: $121.11
11. Enghouse Systems (ENGH.TO)
There are very few technology stocks that are reliable income plays. What makes them so attractive is they typically offers investors income and growth. With COVID-19 showing how important technology is, Enghouse has vaulted up this list of top dividend stocks.
Enghouse Systems (TSX:ENGH) is no different. In fact, it has the longest dividend growth streak among all tech companies (13 years) and has averaged 20% annual returns over the past five years. Since we released our Dividend Screener to premium members, Enghouse has been consistently ranked at, or near the top of our dividend list.
The divided is safe and growing at a double digit pace. A pace that is not likely to slow anytime soon.
Enghouse has a low payout ratio as compared to earnings (20%) and free cash flow (23%). Considering the company is expected to grow at a 10% to 12% clip over the next few years, the dividend is likely to continue its rapid growth.
The company’s yield is small at just under 1%, but with more than a decade of consistent dividend increases and a 5 year dividend growth rate of 17%, it is a solid play for Canadian dividend investors.
Its most recent dividend increase of 20% is above 5 year averages, and instills further confidence in investors that its dividend will continue to grow at an extensive pace. If that wasn’t enough, Enghouse is also ranked in the top 5 of our Top Technology Stocks list.
YTD Gain: +12.08%
Payout Ratio: 20%
1Yr Target Price: $55.20
10. Opentext (OTEX.TO)
Tech companies are performing extremely well during the COVID-19 pandemic, and I think investors are realizing that tech is not necessarily a sector for the high-growth risk takers. In fact, moving forward we can expect it to become a necessity in every Canadians portfolio.
Back to Opentext, the company specializes in providing Information Management Software, and has just recently entered 2 partnerships that are sure to keep its dividend growing at a fast pace. The company recently partnered with Google’s cloud division, meaning that its applications will soon be available on Google’s cloud platform, along with the integration of its applications on popular Google apps like Google Drive and Google Sheets.
Opentext also recently teamed up with Mastercard, who’s aim is to use the companies assets to increase financing efficiencies in the automobile sector. Opentext has a small dividend yield of only 1.78% at the time of writing, but the reason it is on this list of top Canadian dividend stocks is primarily due to its growth.
The company is a Canadian Dividend Aristocrat, raising dividends for 7 straight years.
Its dividend only accounts for 23% of free cash flows, and is growing at an annual pace of over 15% in the last 5 years. The dividend has slown somewhat, considering OpenText used to have a dividend growth rate north of 20%, but we aren’t concerned. There is still excellent growth opportunities with the company.
YTD Gain: -3.55%
Payout Ratio: 55.83%
1Yr Target Price: $61.52
9. Enbridge (ENB.TO)
**This contribution comes from Mike over at The Dividend Guy Blog and Dividend Stocks Rock. View his bio here**
Enbridge (TSX:ENB) is an energy generation, distribution, and transportation company in the U.S. and Canada. Its pipeline network consists of the Canadian Mainline system, regional oil sands pipelines, and natural gas pipelines.
The company also owns and operates a regulated natural gas utility and Canada’s largest natural gas distribution company. Additionally, Enbridge generates renewable and alternative energy with 2,000 megawatts of capacity.
Enbridge clients enter into 20-25-year transportation contracts. The company is already well positioned to benefit from the Canadian oil sands (as its Mainline covers 70% of Canada’s pipeline network).
As production grows, need for Enbridge’s pipelines remain strong. Now that it has merged with Spectra, about a third of its business model will come from natural gas transportation. The company has a handful of projects on the table or in development.
ENB saw progressed execution of Line 3 Replacement project: Canadian segment construction expected to be completed by end of May 2019; Minnesota Public Utilities Commission (MPUC) denied all petitions to reconsider its project approvals. Project in-service date targeted for the second half of 2020.
The company has been paying dividends for the past 65 years and has 24 consecutive years (2020) of consistent growth. Enbridge expects to increase its payouts by 10% through 2020.
Management reaffirmed their dividend growth policy by announcing their 10% dividend raise for 2019.
Since the pipeline business model is built around long-term contracts and predictable cash flows, I have no doubt this will happen.
Investors looking for exposure to oil and gas stocks may be wise to stick to pipeline companies during this oil and gas bear market, as they have less reliance on the commodity itself, and long term take-or-pay contract create more reliable cash flows.
YTD Gain: -10.53%
Payout Ratio: 112.4%
1Yr Target Price: $55.23
8. Algonquin Power (AQN.TO)
**This stock is a contribution by Mark Seed at MyOwnAdvisor.ca. You can view his article on three top utility stocks for 2019 here.
This company actively invests and operates green and clean energy assets including hydroelectric, wind, thermal, and solar power facilities, as well as sustainable utility distribution businesses (water, electricity and natural gas) through its two operating subsidiaries: Liberty Power and Liberty Utilities.
With more than $10 billion in total assets, AQN is no longer a small utility player and their dividend growth reflects that. Dividends have been increasing year-over-year for 9 consecutive years now and their stock price has tripled during the same time period.
The company sports a tidy 4.64% yield. For long-term dependable income and growth from a much needed, regulated asset like electricity, Algonquin Power & Utilities Corporation should deliver healthy returns for decades to come.
YTD Gain: +3.27%
Payout Ratio: 53%
1Yr Target Price: $21.27
7. Telus (T.TO)
Telus (TSX:T) is a telecommunications company headquartered in Vancouver British Columbia.
Telus offers a multitude of products including television, phone, and internet services. It has been providing services for more than 100 years and its dedication for offering the best services possible is showing through the company’s 13 million subscribers.
Wireless Services account for about 57% of total revenue, Wireline Data (residential network access lines, internet subscribers, TV subscribers) for 32%, and Wireline Voice for the remaining 11% of the total revenue.
Telus boasts 16 straight years of dividend growth and a 5 year dividend growth rate of over 8%. Its most recent increase of 7% falls shy of its 5 year average, but the telecom company has proven to be reliable at consistently raising dividends despite the payments making up over 119% of its current free cash flows.
With a yield of 5.18% the company is finally trading at a bit of a discount. Telus trades at under 16 times earnings and has a 5 year PEG ratio of 3.18.
The company is also one of the stronger 5G telecom opportunities here in Canada, being primarily a pure-play telecommunications company. The company looks like it’s taken a steep drop in price, however this is due to a 2 for 1 share split.
YTD Gain: -9.59%
Payout Ratio: 77.65%
1Yr Target Price: $26.62
6. Royal Bank of Canada (RY.TO)
Royal Bank of Canada (TSX:RY) is not only an excellent Canadian dividend stock, but it is one of the best Canadian bank stocks to own today.
RBC is a global enterprise with operations in 42 countries, including Canada and the United States. Along with personal and commercial banking, the company offers wealth management and investing services to customers worldwide.
Royal Banks brand reputation is impeccable, being named Canada’s most valuable brand for 5 years running.
Its recent acquisition of City National shows its dedication to growing its operations south of the border. In terms of Royal Bank’s dividend, the company currently pays a yield of 4.07%. With a payout ratio of only 46.51% at the time of writing, the dividend is considered fairly safe.
With an 9 year dividend growth streak and a 5 year dividend growth rate of over 7%, next to TD Bank the company has one of the fastest growing dividends out of the Big Five.
Analysts expect the company to grow at an annual rate of 5.4% over the next 5 years, and have a 1 year price target of $100.33, which indicates nearly 20% upside from today’s price.
YTD Gain: -14.88%
Payout Ratio: 46%
1Yr Target Price: $100.33
5. TFI International (TFII.TO)
TFI International (TSX:TFII) is a transportation and logistics company with operations in North America. The announcement of a tri-lateral agreement between Canada, Mexico and the United-States was welcomed news for the company.
It has significant cross-border trading and the deal ensures none of its products will be subject to un-welcomed tariffs. TFI currently has a dividend yield of 2.59%, which is considered low by most income investors standards.
However, it is its dividend growth that places it this high on this Canadian dividend stock list. The company has raised dividends for 9 straight years, and has a 5 year dividend growth rate of 10%.
Its most recent increase of 12% beats its 5 year dividend growth rate by 20%, and this Canadian Dividend Aristocrat, unlike most others, is seeing its dividend growth projecting upwards.
TFI saw a significant spike in its financial performance in 2019. Margins are expanding, and earnings are growing at a triple-digit pace. The best part? Growth is expected to continue.
Analysts expect the company will grow earnings by the mid-teens over the next few years. On the back of increased earnings and cash flows, TFI is an overlooked dividend star in the making.
As a transportation and logistics company, we expect COVID-19 to have a smaller impact on revenue and earnings. We think investors are catching on to this as well, as the company has recovered in price significantly.
Another note, the company dual listed prior to the stock market crash, and trading on the NYSE should expose it to more investors and/or funds.
YTD Gain: -8.03%
Payout Ratio: 25.38%
1Yr Target Price: $48.90
4. BCE (BCE.TO)
BCE (TSX:BCE) provides both residential and commercial clients with a wide variety of telecommunication services including telephone, internet and television.
The company currently has over 9.6 million customers, and its revenue streams are heavily protected in an industry that has some of the highest barriers to entry in Canada. BCE operates in three segments.
First, there is Bell Wireless which provides wireless voice and data services. Secondly, Bell Wireline provides data and satellite television. And finally, they have Bell Media, which provides pay TV along with digital media and radio broadcasting. BCE currently pays a dividend yield of just over 6%.
The company has increased dividends for 11 straight years, and has a 5 year dividend growth rate of 5%.
Bells dividend isn’t necessarily unsafe, but investors must take caution with its 94% payout ratio. To add to this, the company is currently paying out nearly 85% of its free cash flows towards its dividend. That being said, with a decade long dividend streak, we’re comfortable placing the stock in our top 10.
Of note, BCE significantly outperformed its main competitor Telus over the course of 2019, and as such has moved ahead of Telus on this list of Canadian dividend stocks.
YTD Gain: -6.36%
Payout Ratio: 94.07%
1Yr Target Price: $63.32
3. Equitable Bank (EQB.TO)
Equitable Group (TSX:EQB) is one of the best alternative Mortgage lenders in Canada. It has top notch management and has been growing at a double-digit pace over the past number of years.
The company is also positioning itself as Canada’s Challenger Bank. An entirely digital Schedule I Charter Bank, Equitable is proving itself to be a viable alternative to those who are tiring of the Big Five. When it comes to the dividend, Equitable has quietly emerged as one of the best dividend growth stocks in the Country.
EQ Bank is a Canadian Dividend Aristocrat with an nine year dividend growth streak. The most impressive aspect about its dividend is the frequency at which it’s raised. The company has raised dividends for six straight quarters. This is simply astounding, and Equitable Bank should be a stock every Canadian is looking at for income.
Although its yield (2.60% as of writing) is nothing to get excited about, it would be much higher if the company paid out more of its earnings. As it stands today, the payout ratio is under 15% of trailing earnings. The stock also has a five year dividend growth rate of more than 12% annually.
YTD Gain: -47.6%
Payout Ratio: 10.78%
1Yr Target Price: $103.92
2. Fortis (FTS.TO)
Fortis (TSX:FTS) is among the top 15 utility companies in North America and invests in safe, clean and reliable energy solutions to continue serving its loyal customers.
At this point in time, it has over 10 utility operations under its belt in Canada, the U.S. and the Caribbean. Fortis is extremely attractive for a number of reasons.
For one, it boasts one of the longest dividend growth streaks of any Canadian company at 46 years.
The company also operates in a sector with extremely high barriers to entry, which eliminates the risk of market-share loss to new competitors.
Fortis’s consolidated rate base is expected to grow to $32 billion by 2021 and to $35.5 billion by 2023.
This translates into a 5 year compounded annual growth rate of over 6.3%. Along with the company’s 46 year dividend growth streak, it currently pays a yield of 3.55% with a payout ratio of only 49.95%, which is typically low for a utility company.
An investment in Fortis comes with a hefty price tag however, as the company is currently trading at over 20 times forward earnings and has a PEG ratio of over 4.90. However, regardless of the stocks valuation, it seems to trend upwards at an astonishingly consistent pace. Over the last 5 years Fortis’s stock has gained over 50% to go along with its strong dividend.
Low interest rates should bode well for the company and its dividend moving forward in 2020, and Canadian investors will find the company’s reliable revenue and earnings to be a relief, especially during this pandemic.
YTD Gain: +-3.26%
Payout Ratio: 48.35%
1Yr Target Price: $59.45
1. TD Bank (TD.TO)
TD Bank (TSX:TD) is one of Canada’s Big 5 banks and the best Canadian dividend stock in 2020. The financial services giant focuses on several segments which include retail, commercial banking and credit cards. Additionally, TD Bank covers insurance and wealth management.
What makes the company so enticing is the fact that it has a large presence in the United States. This reduces the impact of a weakened Canadian housing market and economy on TD’s revenue. The company focuses on both personal and commercial businesses, U.S. credit cards and auto financing south of the border as well as institutional investments with its subsidiary TD Ameritrade.
Toronto Dominion Bank is considered America’s “most convenient bank” and serves customers at over 2,400 locations. In terms of the company’s dividend, TD Bank has a yield of 5.55% at the time of writing, and has grown its dividend at a rate of 9% annually over the last 5 years.
TD shows no signs of slowing down, as the company has raised dividends for 9 straight years. The company’s dividend only accounts for 9% of its operating cash flows and has a relatively low payout ratio of 46%. Along with its excellent dividend, TD Bank is actually trading at an extremely reasonable price.
Due to a poor fiscal 2019 and COVID-19 related uncertainty the stock is trading at approximately 11 times forward earnings, and has a 5 year PEG ratio of 1.45. Not bad for a stock that investors are required to pay a hefty premium for because of its dividend.
At the time of writing, analysts have placed 1 year upside potential of more than 25% on this Canadian financial giant.
YTD Gain: -20.48%
Payout Ratio: 44.92%
1Yr Target Price: $70.43
Along with our picks, we’ve had some contributions from other excellent Canadian writers
Mike is the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager at Dividend Stocks Rock (DSR). Mike earned his bachelor degree in finance & marketing, owns an MBA in financial services and used to be a financial planner with a CFP title. Besides being a passionate investor, Mike is also happily married with three beautiful children. He started his online venture to educate people about investing and to be able to spend more time with his family.
Mark Seed is the owner and writer over at MyOwnAdvisor.ca, a leading personal finance and investing blog. Mark started investing when he was in his early 20s, and him and his wife are currently well on their way to creating a $1 million dollar portfolio, hitting the $700,000 mark in 2019.
Sabeel is the owner of Roadmap2Retire. Roadmap2Retire is a blog about a Canadian financial independence journey. While following a multi-pronged approach of using index funds and growth stocks, the core portfolio consists of dividend growth stocks and generation of passive income to attain financial independence. The blog discusses all the successes and failures experienced through this journey.