10 of the Best Canadian Dividend Stocks to Buy in March 2023

One of the best ways to increase the value of a stock portfolio while protecting it from adverse market movements is to add Canadian dividend stocks. Particularly Canadian Dividend Aristocrats, that will provide income in any market environment.

Many investors first learning how to buy stocks in Canada want to know what the best options are today. This is why we decided to make a list of the top ten options in Canada.

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

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

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

Warning - The best dividend stocks don't always have the highest yield

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

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

Chasing yield is one of the biggest and most common mistakes beginners make, and it is imperative you put the quality of the company at the top of your list, rather than how much it will pay you.

Is there an ETF to make dividend investing easier?

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

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

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

It's important to note that these dividend ETFs do come with management fees, and need to be considered prior to purchasing.

What Canadian stocks pay the best dividends?

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

Which Canadian stocks pay monthly dividends?

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

What are the 5 highest dividend paying stocks?

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

• Corus Entertainment (CJR.B) 11.94%
• Canacol Energy (CNE) 10.89%
• Algonquin Power (AQN) 10.4%
• Fiera Capital (FSZ) 10.11%
• MCAN Financial (MKP)  9.87%

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

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

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

What are the best dividend stocks in Canada?

• Bank of Nova Scotia (TSE:BNS)
• Canadian National Railway (TSE:CNR)
• Metro (TSE:MRU)
• Canadian Apartments REIT (TSE:CAR.UN)
• Canadian Natural Resources (TSE:CNQ)
• TC Energy (TSE:TRP)
• Alimentation Couche-Tard (TSE:ATD)
• Royal Bank of Canada (TSE:RY)
• BCE (TSE:BCE)
• Fortis (TSE:FTS)

10. Bank of Nova Scotia (TSX:BNS)

The bank first paid a dividend in 1833 and has never missed a dividend payment since.

It has also raised dividends in 44 of the past 46 years. The 2008 Financial Crisis halted all the dividend growth streaks of Canada’s Big Banks. However, not one cut the dividend. This is in stark contrast to what happened worldwide.

Banks like Royal Bank, Bank of Montreal, and Toronto Dominion Bank raised just prior to the pandemic in 2020, so their streaks stayed intact. CIBC and Scotiabank were not as lucky. But, don't let this discourage you. The Bank of Nova Scotia is still an excellent option for high yield seekers.

Scotiabank has been mired in inconsistencies in the past and has struggled to keep up with the other major banks. This is primarily why it is currently the highest yielding. But there are signs the company is turning the corner, and it could potentially be set for a rebound year.

Will it keep up with lower yielding, higher growth banks like National, BMO, and TD? It's unlikely. But for those who are willing to sacrifice a little bit of overall returns for a higher passive income stream, Scotiabank is a strong option.

Fears of a recession are likely going to have an impact on the share price of Canada's big banks. Investors may be wise to utilize this time to accumulate for the long term.

9. Canadian National Railway (TSE:CNR)

But despite being prone to different economic conditions, Canadian National Railway has thrived. The company is growing the dividend at an impressive pace. It has a dividend growth streak of 27 years and a five-year dividend growth rate of 10.4%. The stock's consistent rise in price has resulted in a low yield, with the company yielding either in the high 1% or low 2% range.

But, a low yield doesn't equal a poor company. Chasing yield can often get people in trouble, and despite Canadian National having an unattractive yield, it has more than doubled the returns of the TSX index over the last decade. In fact, it has put up annualized returns of just over 15.5% during that timeframe, more than the S&P 500.

Despite its size, CN Rail has been able to adapt, re-route and focus operations on those customers that ran essential services.

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

8. Metro (TSE:MRU)

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

With a 28-year dividend growth streak, the company also sports a mid-single-digit dividend growth rate over the last 5 years. From a company operating in a mature sector like Metro, this is outstanding dividend growth.

With payout ratios in terms of earnings and free cash flows in the low 30% range as well, this signals that the company shouldn't be slowing this dividend growth pace anytime soon.

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

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

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

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

For one, a real estate investment trust is forced to pay back a particular percentage (90%+) of its earnings to unitholders. Being a common shareholder of stock, the dividend does not necessarily need to be placed highest on the totem pole. And secondly, due to the fallout of the pandemic, inflation is going to be a long-standing fear and overall concern when it comes to the deterioration of investor capital.

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

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

The company's portfolio contains both mid-tier and luxury properties and generates the majority of its revenue from the Toronto and Greater Montreal regions.

CAPREIT is in one of the best financial positions out of all Canadian REITS, with a debt to gross book value under 40%, and its dividend accounts for less than 60% of funds from operations.

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

The REIT doesn't have the flashy yield that many others do in the low 3% range. However, it's important to understand that while payout ratios were high and dividends were getting cut in the sector during the pandemic, CAPREIT was at no risk of cutting the distribution. As mentioned at the start of the article, the reliability of a dividend is much more important than the overall yield.

6. Canadian Natural Resources Ltd (TSE:CNQ)

 The company has raised the dividend for more than 2 straight decades and has double-digit 1 and 5-year dividend growth rates.

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

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

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

New projects and expansion are likely to be put on the backburner as balance sheets are restored, and instead Canadian Natural will likely look to return capital to shareholders through increased and special dividends along with share buybacks.

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

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

5. TC Energy (TSX:TRP)

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

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

Now that we are seeing the price of oil recover and stabalize, it's likely TC Energy, despite not being impacted as much by the price of oil as a producer, will still get some of the growing oil price tailwinds.

The company has a low-risk business model in which 95% of EBITDA is generated from regulated or long-term contracted assets. This is exactly why in the midst of the pandemic it stated that operations were relatively unaffected. Many pipelines have take-or-pay contracts with producers. This means that regardless of the product shipped, the pipeline gets paid. 

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

The company currently yields in the high 6% range, is trading at less than 12 times forward earnings, and is set to benefit from an energy crisis that, for many analysts, feel is just getting started.

4. Alimentation Couche-Tard (TSE:ATD.B)

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

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

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

With a 13-year dividend growth streak, a 5-year dividend growth rate of over 20%, and a payout ratio under 12%, this is a company that is in one of the best positions in the country to fuel dividend growth for investors.

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

With this type of dividend growth, its yield can only remain low if one thing is occurring, rapid share appreciation. And, this is 100% the case. In fact, a $10,000 investment in Couche-Tard just a decade ago is now worth over $80,000. At that point, I don't care about the yield. I'll sell some shares and create my own dividend!

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

As a bonus, it's also one of our Foundational Stocks over at Stocktrades Premium. So, click here to get started!

3. Royal Bank of Canada (TSX:RY)

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

The company has operations in the capital markets via RBC Direct Investing but also deals with commercial banking, retail banking, and wealth management.

At 44%, RBC has one of the lowest payout ratio among its peers. The company is the Canadian bank with the most geographical exposure, with exposure in over 40 countries. This allowed the bank to perform exceptionally well during the pandemic as it was exposed to a variety of countries that were at different stages of recovery/lockdown, unlike a bank like TD Bank, which relies heavily on the United States.

Interest rate increases are set to benefit Canada's banks. However, there is a fine line here. Raising interest rates ultimately helps margins for the banks as they can lend money for higher rates. However, the Bank of Canada has been raising rates at a significant pace. In fact, the fastest in its history. As a result, recession fears have driven down bank valuations.

This is likely overthinking things, as Royal Bank has proven to be an exceptional performer regardless of the economic circumstances. Royal Bank owns a 12-year dividend growth streak over which time it has grown the dividend by mid single digits annually. Now yielding in the 4% range, the Royal Bank is deserving of its place among Canada’s top dividend stocks.

2. BCE (TSX:BCE)

It is the only one of Canada’s Big Three telecoms to have a strong presence from coast-to-coast. Rogers tends to have more exposure in the east, and Telus in the west.

BCE currently yields in the low 6% range, which is right around the company's historical average. The company has a 14-year dividend growth streak over which time it has averaged approximately mid single-digit dividend growth.

At first glance, the 14-year dividend growth streak might not seem that impressive considering the company’s long and storied history. However, the streak is a little misleading. The company froze the dividend in 2008 when it was being taken private by a group led by the Ontario Teachers Plan.

However, the deal ultimately fell through and the company resumed growing the dividend. Since it went public in 1983, BCE has never missed a dividend payment, nor has it cut the dividend.

One of the biggest drawbacks of the company is the high payout ratios. Currently, the dividend accounts for more than 100% of earnings.

If we look at free cash flow, the company is also paying out more than 100%. However, this is likely due to the company taking advantage of an ultra-low interest rate environment. It is very likely the company scales back investments as rates continue to rise, which should normalize payout ratios.

BCE is neither cheap nor expensive when compared historically or to its peers. Not surprising as BCE is one of the most consistent and reliable stocks in the country. Don't expect earth-shattering returns from the company's share price. But, own this one for a decade and reinvest the dividends, and you'll likely be happy.

1. Fortis (TSX:FTS)

Given our current environment of uncertainty, dividend safety and reliability is the main reason why Fortis is our top dividend stock in Canada. Throughout the past three, five, and ten-year time frames, Fortis has consistently raised the dividend by approximately 6%.

Further demonstrating its reliability, Fortis is one of the few companies which provides multi-year dividend growth targets. Through 2024, Fortis expects to raise the dividend by 6% annually – in line with historical averages. There is a possibly that rising rates could lower this growth. However, we feel most of this is already priced into the stock.

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

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

$10,000 in Fortis in the mid 1990's is now over $274,000 if you reinvested your dividends. The company has simply been an exceptional performer.

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

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