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September 8, 2020

Canada’s Top 10 Dividend Stocks for 2021 and Beyond

Disclaimer: The writer of this article may have positions in the securities mentioned in this article. The fact they hold positions in securities has had no impact on the production of this article

By Mathieu Litalien

September 8, 2020

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. Income stocks are extremely popular for new investors learning how to invest in stocks.

If you're looking for some of the most reliable dividend stocks in the country however, make sure to subscribe to grab our Aristocrat cheat sheet. You'll see the offer pop up intermittently throughout the article.

This cheat sheet contains every single Canadian Dividend Aristocrat, including dividend growth rates, dividend growth streaks and critical payout ratios. You won't find a better resource on the internet!

What are the top dividend stocks in Canada?

Optimally, you want to look for dividend stocks with long growth streaks and double digit growth.

Some sectors of the stock market provide a lot of options, while others only a few. For example, the Canadian tech sector currently has two aristocrats.

On the contrary, the utility sector contains some of the most reliable income companies in the country. There are a total of 10 aristocrats with companies like Fortis and Canadian Utilities almost at Dividend King status (over 50 years of consecutive growth). Hint - You'll see one of them near the top of this dividend stock list.

So what Canadian companies have cut dividends during the pandemic?

We've been keeping track of what we believe is hands down the best list of dividend cuts that have happened during the pandemic. We used to have this on a separate page, but decided to merge it so Canadians could have all relevant information in one place.

Do Canadian bank stocks pay dividends?

This is a question we get a lot here at Stocktrades, as investors have no doubt heard that the banking sector is one of the most reliable in the world because of strict regulations.

After all, Canadian banks managed to maintain their payments during the financial crisis of 2008, while other financial institutions were slashing dividends at a rapid pace.

There's plenty of bank stocks on this list, but if you're looking for major companies, head to our list of the Best Canadian Bank Stocks to get more in depth research.

This list of Canada's top 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 high on this list due to the company's dividend growth.

This late 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.

Just because a stock is listed high on this list, or one of your dividend stocks didn't make the list, doesn't necessarily mean it is a poor income stock. Remember, there are over 3000 stocks trading on the TSX and the TSX Venture. This is only 10 of them.

This list also doesn't contain any stocks we have highlighted over at Stocktrades Premium. If you want the true best of the best, click here to get started for free.


Our top 10 Canadian dividend stocks to be looking at heading into 2021

  • Savaria (TSX:SIS)
  • Sunlife Financial (TSX:SLF)
  • Granite REIT (TSX:GRT.UN)
  • Bank of Nova Scotia (TSX:BNS)
  • Allied Properties REIT (TSX:AP.UN)
  • TC Energy (TSX:TRP)
  • Genworth MIC (TSX:MIC)
  • BCE (TSX:BCE)
  • Royal Bank of Canada (TSX:RY)
  • Fortis (TSX:FTS)

Continue reading however for detailed research, updated as of September 8th 2020.

10. Savaria (TSX:SIS)

Savaria logo

For our first pick, we are going off the board a little with a lesser known dividend stock. Savaria (TSX:SIS) is a global manufacturer and distributor of mobility devices and clinics.

The company is ideally situated to benefit from an aging population.

Savaria is a former Stocktrades Bull List stock, brought to the attention of our Stocktrades Premium members last year. Savaria provides investors with a unique combination of growth and income.

Typically, high growth companies focus on deploying cash strictly towards growth opportunities. It is why you see few high-growth (or technology) Canadian Dividend Aristocrats.

However, Savaria is one of the few that has balanced both growth, and returning cash to shareholders via the dividend. Savaria owns a seven-year dividend growth streak over which time it has averaged double-digit dividend growth.

Another huge benefit is the fact the company pays a monthly dividend, with a yield in the 3.05% range.

Over the past five years, Savaria has average around 14% annual earnings growth. This year, analysts are estimating earnings to drop by 14% as COVID-19 is expected to stunt growth. However, it appears analysts are being a little too pessimistic.

In the last quarter, (which reflected a full quarter of COVID-19 economic mitigation efforts), Savaria’s earnings were flat YoY and beat analysts estimates by 33%.

Analysts have begun to revise their estimates upwards, a trend that is likely to continue. The company is now trading at a 17% discount to analysts estimates, and they have a unanimous ‘buy’ on the stock.

5 year dividend-adjusted return of SIS vs the TSX:

Dividend adjusted return chart SIS vs TSX

Market Cap: $755 million
Forward P/E: 27.56
Yield: 3.05%
Dividend Growth Streak: 7 years
Payout Ratio (Earnings): 80.63%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 15.50%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

 

9. Sunlife Financial (TSX:SLF)

Sunlife Financial logo Financials and insurers in particular have been among the worst performing industries in 2020. As the pandemic hit, fears of a recession have dragged the financials to valuation levels not seen since the 2008 Financial Crisis.

However, these fears have thus far proved to be overblown.

The performance of Sunlife (TSX:SLF) is proof that insurers are not as susceptible to an economic crisis as they once were. Insurers are much better capitalized and are now better suited to navigating the current crisis. Year to date, Sunlife has only lost 8.36% of its value, whereas most of its peers are sitting on losses of 20%+ this year.

Sunlife is one of the newest additions to the Canadian Aristocrat list. After years of dividend stagnation following the 2008 Financial Crisis, it is once again a reliable dividend growth stock. Throughout its five-year dividend streak, it has averaged high, single-digit dividend growth.

Sunlife’s 4.05% yield is not only attractive, it is quite safe despite the perceived bias that it may not be.

As of writing, the dividend accounts for only 40.29% of earnings, 30.54% of free cash flow and 29.71% of operational cash flow. The risk of a dividend cut is low.

Remember, these insurers are in much better shape than they were during the Financial Crisis.

In fact, the company is well positioned to continue raising dividends as it has a targeted dividend payout ratio (as a percentage of earnings) of 40-50%. Sunlife also expects to grow earnings at an 8-10% annual clip.

Considering the company’s current payout ratio is at the low end of guidance, there is no reason the company shouldn't be able to keep the dividend growth inline with earnings growth.

5 year dividend-adjusted return of SLF vs the TSX:

Dividend adjusted return chart SLF vs TSX

Market Cap: $36.8 billion
Forward P/E: 10.88
Yield: 4.05%
Dividend Growth Streak: 5 years
Payout Ratio (Earnings): 41.67%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 10.20%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

 

8. Granite REIT (TSX:GRT.UN)

Granite Real Estate

 

Real Estate Investment Trusts (REITs) are a favorite among income investors.

Given the regulations, they are required to pay out a percentage of their income to shareholders via dividends. This often results in higher than average yields.

However, dividend growth is not as prevalent in the sector and there are only about a dozen REITs which have a history of raising the dividend. Topping the list is Granite REIT which has a nine-year dividend growth streak.

Over the past five years, this industrial REIT has averaged 5% dividend growth. It is also the only Industrial REIT to have achieved Canadian Dividend Aristocrat status.

Amidst the ongoing pandemic, industrial REITs have been among the best performing in the Real Estate Sector.

Unlike the pressures exhibited on Office and Retail REITs, Industrials are seeing strong demand.

Last quarter, Granite reported funds from operations grew by 9% YoY and the occupancy rate was sitting at 99.1%. This, in the middle of a pandemic.

In fact, occupancy and rent collection rates for Industrial REITs held up better than any other industry. What is being made abundantly clear is that warehouse and distribution spaces will remain in high demand as the shift to eCommerce is here to stay.

To top things off, Granite is in the best financial position among its peers. It has an industry leading debt-to-gross book value (22%), interest coverage (10.4x) and has 27.7x months revenue coverage ratio. The latter is not only the best among industrials, it is the best ratio among all TSX-listed REITs.

 

5 year dividend-adjusted return of GRT.UN vs the TSX

 

5 year dividend adjusted return granite vs tsx

Market Cap: $4.39 billion
Forward P/E: 18.63
Yield: 3.83%
Dividend Growth Streak: 9 years
Payout Ratio (Earnings): 76.42%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 2.70%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

7. Bank of Nova Scotia (TSX:BNS)

ScotiaBank

 

In reality, we could litter out top 10 list with Canada’s Big Five banks. They are among the most reliable income stocks in the world. Why has the Bank of Nova Scotia (TSX:BNS) made our list over some of the others? Yield.

As of writing, the Bank of Nova Scotia’s 6.51% yield is almost a full percentage point higher than its closest competitor. It is also well above the company’s 10-year average of 4.71%. Simply put, the opportunity to lock in such a high yield is a rarity.

The Bank of Nova Scotia owns a nine-year dividend growth streak in which it averaged approximately 6% annual dividend growth. The bank first paid a dividend in 1833 and has never missed a dividend payment since.

It has also raised dividends in 43 of the past 45 years. The 2008 Financial Crisis halted all of Canada’s Big Banks dividend growth streaks. However, not one cut the dividend. This is in stark contrast to what happened worldwide.

A similar phenomenon is happening today. European Banks have been forced to cut the dividend, and some US banks such as Wells Fargo have also cut this year. In Canada, it is steady as it goes.

Although the Feds have asked Canada’s banks not to raise the dividend during the pandemic, there is no current risk of a dividend cut at the Bank of Nova Scotia.

Year to date, the Bank of Nova Scotia is the worst performing bank (down 24.55%) and this has led to near record low valuations. It is not a matter of IF, but WHEN, the Bank of Nova Scotia will return to trading inline with historical averages. In the meantime, it is a good time to accumulate.

If you notice below, the Bank of Nova Scotia is actually underperforming the TSX over the last 5 years, dividends included.

This is the only stock on this list of dividend payers that is underperforming. We see lots of upside potential in BNS right now.

5 year dividend-adjusted return of BNS vs the TSX

Scotiabank 5 year dividend adjusted return vs tsx

Market Cap: $67 billion
Forward P/E: 10.61
Yield: 6.51%
Dividend Growth Streak: 9 years
Payout Ratio (Earnings): 62.80%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 6.40%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

6. Allied Properties REIT (TSX:AP.UN)

Allied Properties REIT

 

Office REITs have been among the hardest hit industries in this pandemic. The shift to work at home has many questioning whether or not there will be a need for office space on the other side. Although there are certainly trends worth monitoring, the need for office space will remain, and it may just look slightly different.

Given this, we believe that Allied Properties REIT (TSX:AP.UN) offers investors an attractive risk to reward opportunity. It is currently trading at a 15% discount to net asset value and a pretty significant 42% discount to analysts one-year average. Furthermore, it is among the best Office REITs in the country.

First, the company’s distribution which currently yield’s 4.38%, is well covered. It accounts for only 83% of adjusted funds from operations (AFFO), one of the best coverage ratios in the industry.

It is also the only Office REIT which is a Canadian Dividend Aristocrat. The company owns an eight-year dividend growth streak in which it has averaged ~2.5% annual dividend growth.

Allied Properties is also in one of the best financial positions of its peers. It has an industry leading debt-to-gross book value of only 27% and its liquidity coverage ratio of over 10 times is also best-in-class.

To top things off, analysts are expecting the company to growth revenue at an average of 26% over the next few years. Once again, this is tops in the industry and is one of the main reasons why we believe Allied has an attractive risk-to-reward profile.

5 year dividend-adjusted return of AP.UN vs the TSX

Allied Properties 5 year dividend adjusted return vs tsx

Market Cap: $1.7 billion
Forward P/E: N/A
Yield: 4.38%
Dividend Growth Streak: 8 years
Payout Ratio (Earnings): 72.50%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 2.30%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

5. TC Energy (TSX:TRP)

TransCanada Pipeline

 

We can’t talk about the top dividend stocks in Canada without mentioning one of Canada’s pipelines. Although the oil & gas industry has been under pressure recently, pipelines are not as sensitive to the price of commodities.

Among the best pipelines in the country, TC Energy (TSX:TRP). It is the second-largest midstream company in the country and owns a 19-year dividend growth streak. This is tied for the 13th longest dividend growth streak in the country.

Over the course of its streak, it has averaged high, single-digit dividend growth.

Despite facing considerable industry headwinds, TC Energy continues to generate a ton of cash. The company’s 71% payout ratio is among the best in the industry and the dividend accounts for only 43% of operational cash flows.

Through next year, the company has a targeted dividend growth rate of 8-10%.

Despite the price of oil crashing, the company has re-iterated dividend growth guidance several times. This is not surprising as the company has a low-risk business model in which 95% of EBITDA is generated from regulated or long-term contracted assets.

Now yielding 5.45%, trading at 15 times forward earnings and at a 20% discount to analysts one-year estimates, TC Energy is looking quite attractive for those looking to lock in a high income at attractive valuations.

5 year dividend-adjusted return of TRP vs the TSX

TC Energy 5 year dividend adjusted return vs tsx

Market Cap: $55.90 billion
Forward P/E: 14.47
Yield: 5.45%
Dividend Growth Streak: 19 years
Payout Ratio (Earnings): 70.28%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 8.70%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

4. Genworth MIC (TSX:MIC)

GenWorth MIC

 

A new addition to our dividend list Genworth MI Canada (TSX:MIC) is establishing itself as a strong dividend stock worthy of investors consideration. It is one of the largest private residential mortgage insurers in the county.

Genworth provides mortgage default insurance to mortgage originators and lenders. The company generates income from insurance premiums and investments.

Bears expect Canada’s housing market to come crashing down, especially considering the current pandemic. However, the industry in providing to be quite resilient and Genworth has thus far proved to be quite strong.

In the last quarter, which reflected the full brunt of COVID-19 impacts, Genworth crushed analysts estimates. Earnings per share came in at $1.17, beating the street average by 31.2%.

Even if there are residual effects that will pressure the housing industry, Genworth is in an ideal situation to weather the storm. The company’s payout ratios against earnings and cash flows (FCF & OCF) come in at only 41.86% and 31.91% respectively.

Given this, the company’s 6.11% yield is one of the most attractive and sustainable on the Index. The company has an 11-year dividend growth streak and has averaged 7.5% dividend annual dividend growth over the past five years.

Genworth is also trading at very attractive valuations. At only 7.80 times forward earnings and below book value (0.81), the markets are discounting the company’s resiliency. As the economy rebounds, Genworth is well positioned to be a top performer.

5 year dividend-adjusted return of MIC vs the TSX

Genworth MIC 5 year dividend adjusted return vs tsx

Market Cap: $3.05 billion
Forward P/E: 7.60
Yield: 6.11%
Dividend Growth Streak: 10 years
Payout Ratio (Earnings): 41.86%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 7.80%%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

3. BCE (TSX:BCE)

BCE Logo When it comes to moat and reach, BCE (TSX:BCE) ranks up there with the best.

It is the largest telecommunications firm in the country and provides services to over 9.6 million customers across Canada. It is the only one of Canada’s Big three to have a strong presence from coast-to-coast.

BCE currently yields a very attractive 5.84% which is right inline with its historical averages.

The company has an 11-year dividend growth streak over which time it has averaged approximately 5% annual dividend growth.

At first glance, the 11-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’s 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 and payment, nor has it cut the dividend.

One of the biggest drawbacks with the company is the high payout ratios. Currently, the dividend accounts for 103% of adjusted earnings.

Although this is concerning, the rate as a percentage of cash flows drops considerably. Currently, the dividend accounts for only 66% and 36% of free cash flow and operational cash flow respectively.

The company is currently trading inline with historical averages, and is neither cheap, nor expensive compared to its peers. Not surprising as BCE is one of the most consistent and reliable stocks in the country.

5 year dividend-adjusted return of BCE vs the TSX

BCE 5 year dividend adjusted return vs tsx

Market Cap: $50.4 billion
Forward P/E: 18.97
Yield: 5.96%
Dividend Growth Streak: 11 years
Payout Ratio (Earnings): 103.42%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 5.10%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

2. Royal Bank of Canada (TSX:RY)

Royal Bank

 

The Royal Bank of Canada (TSX:RY) is the largest bank in Canada and is among the largest companies in the country. It has been named Canada’s most valuable brand for five years running and is consistently among the best performing Big Five banks.

Year to date, Royal Bank of Canada has only lost 5.68% of its value. This is second only to CIBC and far better than the double-digit losses posted by the rest of its peers. Furthermore, it has been the top performing Big Five bank over the past 3, 5, and 10-year periods.

Given the strong results posted by Canada’s banks during this pandemic, we believe that it is only a matter of time before Canada’s Big Banks receive the green light to once again raise dividends. Today, the best positioned to do so is Royal Bank.

At 55.53%, it has the lowest payout ratio among its peers. It is also important to note, that the respectable payout ratio is on a trailing twelve-month basis, which means that it includes two quarters of pandemic-related impacts. Over the last two quarters provisions for credit losses spiked, yet despite this the dividend remains well covered.

Royal Bank owns a nine-year dividend growth streak over which time it has grown the dividend by an average of 7.5% annually. Now yielding 4.36% (above its 5-year historical average), the Royal Bank is deserving of its place among Canada’s top dividend stocks.

5 year dividend-adjusted return of RY vs the TSX

Royal Bank 5 year dividend adjusted return vs tsx

Market Cap: $137 billion
Forward P/E: 12.86
Yield: 4.46%
Dividend Growth Streak: 9 years
Payout Ratio (Earnings): 54.54%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 8.00%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

1. Fortis (TSX:FTS)

Fortis

 

Fortis (TSX:FTS) has been a mainstay on our list of top dividend stock for years. As the largest utility in the country, Fortis is arguably one of the most defensive stocks to own.

Given our current environment of uncertainty, dividend safety and reliability is the main reason why Fortis is our top dividend stock in Canada.

Fortis owns the second-longest dividend growth streak in Canada. At 46-years long, the company will be among the first Canadian stock to reach Dividend King status – a prestigious status reserved for those who have raised the dividend for at least 50 consecutive years.

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 – inline with historical averages.

In August, the company re-iterated that its capital program and dividend growth guidance remains intact despite the current pandemic. Combine strong dividend growth with an attractive yield (3.60%) and you are looking at the top income stock to own.

Fortis is currently trading at 19 times forward earnings and 1.20 times book value. This is slightly below the industry averages of 20.37 and 1.72 respectively. Not only can investors lock in a safe and attractive dividend, they can do so at respectable valuations.

5 year dividend-adjusted return of FTS vs the TSX

Dividend adjusted return chart FTS vs TSX

Market Cap: $10.8 billion
Forward P/E: 277
Yield: 3.67%
Dividend Growth Streak: 10 years
Payout Ratio (Earnings): N/A
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 5.10%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

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Mathieu Litalien


Mathieu is an individual investor and has been investing part-time for the better part of the past 20 years. He is primarily interested in fundamental analysis, focusing on the long-term and his portfolio is composed primarily of dividend-paying equities. Mathieu has a moderate risk profile and also looks for growth and value. His passion for finance and the markets have led him to his MBA and writing for Seeking Alpha, Motley Fool and Stocktrades. Mathieu also focuses primarily on stock research and content production for Stocktrades.ca Premium and the Stocktrades blog.

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