One of the main investment strategies that I have used on my way to financial freedom is dividend investing. In this strategy, I buy companies that have a history of paying dividends, but more importantly dividend increases. In order for a company to pay a steady, sustainable growing dividend, they need to have a strong business model and, as a result, they typically become a large company (or a large market cap company). In other words, strong and established dividend stocks are typically blue chip stocks.
For my Canadian dividend portfolio, I essentially own the largest blue-chip stocks in Canada that pay a dividend. In addition to their history of dividend growth, I like companies that have a strong competitive advantage and have a moat or monopoly-like presence in their sector. I also like to diversify my positions across sectors, as described in my post on how to build a dividend portfolio.
While I do like dividend stocks in my portfolio, I tend to avoid owning companies just for their high yield. I tend to own companies in the 2-5% dividend yield range, but that’s not to say that I avoid high yielders completely, I’m just a little more cautious around those. Rather than building a portfolio solely on dividend yield, it helps to diversify the portfolio across sectors and geography.
So what are my favourite Canadian dividend stocks sorted by sector? See below for my listing of stocks, and you may notice that some are very similar to a recent post on Best Canadian Dividend Stocks.
Canada’s Top 38 Dividend Growth Stocks
(Ten Years or More Dividend Increases and including all the best blue chip companies)
Click below to find all the new additions to our previous list of top Canadian stocks – now updated for 2021! The following have been handpicked for their ability to face the economic lockdown and thrive going forward.
Also, note that the positions below have a Canadian bias, it’s recommended to diversify by picking up US and international positions. Remember that Canada represents only 3-4% of the global stock market, and highly concentrated in a few sectors. Personally, I typically use an index ETF (like iShares XAW) or an all in one ETF, to diversify my portfolio with international exposure.
One more thing, not all of the positions below perfectly fit the criteria that I listed previously. So best to use this list as a starting point for your research.
Picking one stock per sector (sorted by size), here are my favourite Canadian blue-chip dividend stocks:
Toronto-Dominion Bank (TD)
- Sector: Financials
- Notes: Financial stocks have faced some challenges since 2008, but Canadian banks are as resilient as ever due again to no outside competition. TD Bank is #2 in size next to Royal Bank which is also a favorite of mine (could have put either one here).
- Market Cap: $130B
- Dividend Streak of increases: 9 years
- Current Yield: 4.88%
Canadian National Railway (CNR)
- Sector: Industrials
- Notes: This company is up there amongst my favourite dividend stocks due to its large moat. It would be onerous for another company to build railways and compete directly with CNR. Although the yield is a little lower than the other picks on this list, they have a long history of increases (24 years) and more to come!
- Market Cap: $99B
- Dividend Streak of increases: 23 years
- Current Yield: 1.64%
- Sector: Energy
- Notes: Energy stocks have certainly faced some challenges over the past several years. However, companies that own pipelines charge a fee for use, and often negotiate longer-term contracts. So it’s almost like owning a toll road and get paid regardless of the economy. If you would like more exposure in this sector, another consideration is Transcanada.
- Market Cap: $82B
- Dividend Streak of increases: 23 years
- Current Yield: 8.2%
Alimentation Couche-Tard (ATD.B)
- Sector: Consumer
- Notes: Couche-Tard is a multi-national convenience store owner-operator with 15k stores spread over Canada, US, Mexico, Ireland, Norway, Sweden, Denmark, Estonia, Latvia. Although margins can be slim with these types of stores, they take advantage of supply chain scale and volume sales. Their strategy is growth through acquisition.
- Market Cap: $48B
- Dividend Streak of increases: 10 years
- Current Yield: 0.81%
- Sector: Communications
- Notes: For telecom/communications in Canada, there are a few choices to consider namely BCE, Telus and Rogers. My preference is with the larger companies BCE and Telus, but if choosing between the two, I like Telus due to their expansion into the health sector. Also, don’t forget that telecom companies in Canada currently have a monopoly resulting in a large barrier of entry for new companies.
- Market Cap: $32B
- Dividend Streak of increases: 15 years
- Current Yield: 4.88%
- Sector: Utilities
- Notes: This is not only one of my favourite utility stocks, this could be my favourite dividend stock in Canada! With dividend increases every year over the last 46 years, their steady eddy business model is easy to support and hold over the long term.
- Market Cap: $24B
- Dividend Streak of increases: 46 years
- Current Yield: 3.84%
Canadian Apartment Properties REIT (CAR.UN)
- Sector: Real Estate
- Notes: Canada doesn’t have a large REIT presence, but of the few quality listings available, CAR is among my favourites (and also the largest in Canada). As their company name suggests, they own apartments across Canada, but surprisingly also units in the Netherlands and Ireland.
- Market Cap: $8.55B
- Dividend Streak of increases: 8 years
- Current Yield: 2.76%
Enghouse Systems Limited (ENGH)
- Sector: Technology
- Notes: Although ENGH isn’t quite a “blue-chip” stock, they are one of the few technology companies in Canada that pay a steady and growing dividend. Although not a “sexy” company like Shopify (currently the largest company in Canada), their business focuses on enterprise-level software solutions in the areas of remote work, visual computing, and communications.
- Market Cap: $3.41B
- Dividend Streak of increases: 13 years
- Current Yield: 0.88%
Disclaimer: This post of for informational purposes only. In addition, I have positions in each of the companies listed in this post.
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