Best Canadian Dividend Stocks – September 2023

As we update our list of the Best Canadian Dividend Stocks for September 2023, we continue to focus on four key areas:

• Dividend Yield
• Dividend Growth Consistency
• Earnings Per Share
• Overall Company Revenues

As we go back to school and look ahead to fall, we continue to see the headlines dominated by high interest rates and American tech stocks.  However, Canadian dividend stocks have been ticking along as well.  While you’ll still hear a lot of talk about recessions, if you have visited an airport lately, it sure doesn’t look like we’ll be in a recession anytime soon!  

Given the relatively strong earnings picture, the rapid decrease in inflation, and reasonable Canadian valuations (especially compared to American peer companies) Canadian dividend stocks continue to look very attractive.  With consumer confidence on the upswing, and the overheated economy cooling off, a “soft-ish landing” for stocks might have already happened.

Our #1 pick for the year – National Bank – is up 8.4% so far in 2023.  That’s a substantial premium compared to the 1% gain in the S&P/TSX 60 Index year-to-date.  Let’s not forget that National Bank is also paying out a solid 4.1% yield right now, for a total return of about 10.5% so far this year. 

We remain confident in the medium- and long-term prospects for National Bank despite some of the negative US-generated banking headlines again last week.  With the bulk of its mortgages in the relatively low-cost Quebec market.

Admittedly, Canadian energy dividend stocks could have been higher on this list, but we have benefitted from the energy price rise with our mid-stream picks. Much as we anticipated, Canadian bank stocks, Canadian utility stocks, and Canadian telecommunications stocks have proven quite resilient. 

As a longtime dividend investor (I’ve had a Canadian dividend investing portfolio for over 15 years now, since I started the Smith Manoeuvre) I’ve learned that while current dividend yield is a beautiful thing, it’s the long-term dividend growth and earnings per share (EPS) that will really drive your overall portfolio returns. 

My personal selection for the top dividend stocks for long-term investments are available below.

Our Top 10 Canadian Dividend Growth Stocks (September 2023 Updated)

Here’s a look at our top 10 long-term Canadian dividend stocks in order of their dividend increase streak.

For my full 32-stock list of Canadian dividend earners that I’m buying today – as well as the 74-stock list of US Dividend all stars that I recommend – check out the platform that I personally use to do my dividend stock research.

Note: Data on this article updates periodically. If you are looking for real time data and guidance, read our recommendation below.

Up to Date Dividend Stock Data & Picks

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The person behind DSR is Mike, the most prominent and active dividend stock blogger in Canada and is a certified financial planner since 2003.

You can first read our detailed DSR review, or sign up now by clicking the button below. Our readers are eligible for an exclusive 33% off discount using code MDJ33.

2023 Canadian Dividend Update

While the continued war in Ukraine and the prospect of higher interest rates continues to promote caution around the world, it seems like the strength of the consumer around the world is here to stay for a little while. 

Higher interest rates appear to moderating spending habits to a limited degree, but many folks still have money (or at least increased borrowing capacity) burning a hole in their pocket from the pandemic.

That said, it is difficult to forecast a lot of macroeconomic trends at the moment.  It now appears that interest rates will remain “higher for longer” and that initial predictions of interest rate cuts near the end of 2023 are basically off the table. 

While some investors might be tempted to shift towards more fixed income products, and away from dividend stocks, you just have to look at dividend growth records of these companies to realize that these corporate behemoths will continue to find a way to protect profit margins and reward shareholders.

I love the value of Canadian bank stocks even more after last quarter’s negative banking headlines. There are just a lot of investors out there that get really scared by fear-driven media companies that want to capitalize on your discomfort in order to get you to watch more of their 24/7 business tv programming.

I don’t see any material weakness in the banks, and honestly, given the aggressive expansion into the US, I think there will be substantial opportunity here to pick up American mid-size banks at reduced multiples going forward.

All six of Canada’s major banks continue to enjoy the benefits of a great deposits vs lending interest differential, and so far appear to be doing fairly well at controlling operating costs given the inflationary environment. While National Bank is my favourite, I think TD is very attractively valued right now as well, and is buying back stock at unprecedented levels.

Bank	Price	Dividend Increase	EPS	2017 Dividend	2021 Dividend	2022 Dividend	Payout Ratio
BMO.TO	112.59	25.47%	53.28%	$0.88	$1.06	$1.33	36.56%
NA.TO	99.38	22.54%	57.29%	$0.56	$0.71	$0.87	31.37%
TD.TO	80.67	12.66%	20.06%	$0.55	$0.79	$0.89	40.86%
RY.TO	122.62	11.11%	41.39%	$0.83	$1.08	$1.20	39.02%
BNS.TO	62.4	11.11%	45.30%	$0.76	$0.90	$1.00	46.54%
CM.TO	53.92	10.27%	69.38%	$1.27	$1.46	$1.61	41.81%

With payout ratios like the ones above, combined with those really solid Earnings Per Share numbers – we remain strong in our belief that there are no better options for investors who want stable long-term growth combined with free cash flow. The short video below describes exactly why we’re so confident in Canadian banks right now.

With inflation fears now dominating the media news cycle, we see more than ever that companies with solid balance sheets and oligopoly-driven moat stocks are the smart long-term play. Companies that can pass along those inflation-fuelled rises in costs have historically outperformed during inflation cycles.  

Frankly, I think all of this talk about inflation might be a bit overdone, and that it’s likely to come down to the 3-3.5% range by the end of 2023. At that rate, it’s really only a mild concern in the grand scheme of things. I’d be much more worried if this was deflation we were talking about!

Our list of top Canadian inflation stocks explains exactly which companies we believe are best positioned in order to pass along the inevitable price increases and increased costs that will come along in 2023.

Of course we remain committed to our long-term strategy of balancing EPS with a company’s ability to grow its dividend, in order to allocate our personal dividend nest egg.  

Afterall, the only thing better than a high dividend yield today, is a much larger (and increasing) one tomorrow!

Check out our in-depth Dividend Stocks Rock Review for a deeper dive on just why we trust the service so much, and more details on our exclusive promo offer code: MDJ33

Rogers, Bell, Telus Updates

The inclusion of Telus (T) in our Top 10 Canadian Dividend Growth Stocks chart obviously indicates that we’re big fans of the Canadian telecommunications sector. Given that Rogers (RCI) just finalized their takeover of Shaw, the deck is now even more stacked in this oligopoly’s favour.

The three large telecommunications companies (Telus, Bell, and Rogers) have a stranglehold on the very profitable Canadian market. While the three companies are not noted for aggressive growth plans, the overall growth of the Canadian population should ensure stable growth for the foreseeable future. 

These very solid companies are Canada dividend stock list stalwarts for a reason. With Telus up 9.12% so far in 2023 (and enjoying a nearly 5% dividend yield), we’re happy to have made it our Dogs of the TSX pick for the year.

My Top Canadian Dividend Stock Recommendations

Sorted in order of dividend streak:

Fortis (FTS.TO) – 49 Years of Dividend Growth

• 4.27% Dividend Yield
• 5.87% 5 Year Revenue Growth
• 5.96% 5 Year Dividend Growth
• 79.32% Payout Ratio
• 18.70 P/E

Investment Thesis:

Fortis invested aggressively over the past few years, resulting in strong and solid growth from its core business. An investor can expect FTS’ revenues to continue to grow as it continues to expand. 

Bolstered by its Canadian based businesses, the company has generated sustainable cash flows leading to nearly five decades of dividend payments. The company has a five-year capital investment plan of approximately $20 billion over the period of 2022 through to 2026. Only 33% of its CAPEX plan will be financed through debt, while 61% will come from cash from operations. 

Chances are that most of its acquisitions will happen in the US (which I’m a fan of at the moment). We also like the company’s goal of increasing its exposure to renewable energy from 2% of its assets in 2019 to 7% in 2035. The recent market downtrend offers a great entry point at the current price level.

Dividend Growth Perspective:

Management increased its dividend by 6% like clockwork for the past 5 years and has declared that it expects to increase dividends by 6% annually until 2025. We like it when companies show motivation for growth through acquisitions and reward shareholders at the same time. 

After all, Fortis is among the rare Canadian companies who can claim to have increased their dividend for 49 consecutive years. Fortis is a great example of a “sleep well at night (SWAN)” stock.

Enbridge (ENB.TO) – 27 Years of Dividend Increases

• 7.54% Dividend Yield
• 3.74% 5 Year Revenue Growth
• 7.35% 5 Year Dividend Growth
• 271.26% Payout Ratio
• 25.20 P/E

Investment Thesis:

ENB’s customers enter into 20-25-year transportation take or pay contracts. This means that ENB profits regardless of what is happening with commodity prices. ENB is also well-positioned to benefit from the Canadian Oil Sands as its Mainline covers 70% of Canada’s pipeline network. 

As production grows, the need for ENB’s pipelines remains strong. 

Following the merger with Spectra, about one third of its business model has come from natural gas transportation. Enbridge has a handful of projects on the table or in development. The cancellation of the Keystone XL pipeline (TC Energy) secures more business for ENB for its liquid pipelines. 

ENB has now a “greener” focus with their investments in renewable energy.  They used to have green assets in the past; let’s see if they will keep operating their new projects this time. The stock offers a yield over 6% which makes it a strong candidate for any retirement portfolio.

Dividend Growth Perspective:

The company has been paying dividends for the past 65 years and has had 27 consecutive years with an increase. Further dividend growth is expected to hover around 3%. Management aims at distributing 65% of its distributable cash flow, leaving enough room for CAPEX. 

Look to their latest quarterly presentation for their payout ratio calculation. Management expects distributable cash flow growth of 5-7% annually. We have used more conservative numbers in our DDM calculation that are more in line with the 2020-2022 dividend increases of 3%.

Canadian National Railway (CNR.TO) – 27 Years of Dividend Increases

• 2.07% Dividend Yield
• 5.58% 5 Year Revenue Growth
• 12.17% 5 Year Dividend Growth
• 39.16% Payout Ratio
• 19.55 P/E

Investment Thesis:

CNR has been known for being the “best-in-class” for operating ratios for many years. CNR has continuously worked on improving its margins and was among the first to do so. Today, peers have caught up and all railroads are managed in the same way. CNR also owns unmatched quality railroads assets. 

It has a very strong economic moat as railways are virtually impossible to replicate so we can therefore count on increasing cash flows each year. Plus, there isn’t any more efficient way to transport commodities than by train. 

The good thing about CNR is that an investor can always wait for a down cycle to make an investment. We can often spot a good occasion around the corner since we see railroads as attractive investments. 

Finally, the cancellation of the Keystone XL pipeline will drive demand for oil transport via railroads and CNR has benefitted. Management is being challenged, and we should see more growth emerging from this challenging period.

Dividend Growth Perspective:

Railroad maintenance is capital intensive and could adversely affect CNR in the future. It is a difficult balance to obtain an efficient operating ratio and well-maintained railroads. Continuous (and substantial) reinvestments are required to maintain its network. 

However, CNR continues to boast one of the best operating ratios in the industry. CNR’s growth could also be negatively impacted from time to time as it depends on Canadian resource markets. When the demand is low for oil, forest, or grain products, demand for CNR’s services will obviously slow accordingly. 

We saw how quickly the winds can shift the last couple of years. For example, the pandemic caused a slowdown in weekly rail traffic of about 10% over the summer of 2020. When the oil price is low, trucking steers some business away from railroads. CNR is a captive of its best assets since you can’t move railroads!

Canadian National Resources (CNQ.TO) – 22 Years of Dividend Increases

• 4.26% Dividend Yield
• 21.95% 5 Year Revenue Growth
• 23.03% 5 Year Dividend Growth
• 47.32% Payout Ratio
• 12.47 P/E

Investment Thesis:

In a world where the West Texas Intermediate (WTI) trades at $75+ per barrel, CNQ is a terrific investment (here is your cue since the WTI is trading above $70 lately!). It is sitting on a large asset of non-exploited oilsands and reaches its breakeven point at a WTI of $35. 

What cools our enthusiasm is the strange direction oil has taken along with the fact that oilsands are not exactly environmentally friendly. Many countries are looking at producing greener energy and electric cars. This could slow CNQ’s ambitions for the long term. 

However, CNQ is very well positioned to surf any oil booms. The stock price has more than doubled in value since the fall of 2020. It has previously invested very heavily, and it is now generating higher free cash flow because of past capital spending.

CNQ exhibited resilience in 2020, and this merits a star in their book! If you are looking for a long-term play in the oil & gas industry, CNQ appears at the top of our list at DSR.

Dividend Growth Perspective:

On top of an impressive dividend growth streak of over 20 years, CNQ has recently shifted gears with highly generous dividend increases (28% at the beginning of the 2022, a special dividend, and then another increase of 13% in late 2022!). 

CNQ has proven the resilience of its business model and confirmed its ability to be a strong dividend grower. This is truly impressive. Now that the oil market has strengthened, CNQ should be able to generate healthy cash flows for years to come.

Telus (T.TO) – 19 Years of Dividend Increases

• 6.33% Dividend Yield
• 6.57% 5 Year Revenue Growth
• 6.60% 5 Year Dividend Growth
• 117.59% Payout Ratio
• 27.79 P/E

Investment Thesis:

Telus has grown its revenues, earnings, and dividend payouts on a very consistent basis. Telus is very strong in the wireless industry and is now tackling other growth vectors such as internet and television services. 

The company has the best customer service in the wireless industry as defined by their low churn rate. It uses its core business to cross-sell its wireline services. 

The company is particularly strong in Western Canada. Telus is well-positioned to surf the 5G technology tailwind. Finally, Telus looks to original (and profitable) ways to diversify its business. Telus Health, Telus Agriculture and Telus International (artificial intelligence) (TIXT.TO) are small, but emerging divisions that should lead to more growth going forward.

Dividend Growth Perspective:

This Canadian Aristocrat is by far the industry’s best dividend payer. Telus has a high cash payout ratio as it puts more cash into investments and capital expenditures. 

Capital expenditures are regularly taking away significant amounts of cash due to their massive investment in broadband infrastructure and network enhancement. Such investments are crucial in this business. Telus fills the cash flow gap with financing for now. 

At the same time, Telus continues to increase its dividend twice a year, exhibiting strong confidence from management. You can expect a mid-single digit increase year after year.

Intact Financial (IFC.TO) – 18 Years of Dividend Increases

• 2.19% Dividend Yield
• 17.70% 5 Year Revenue Growth
• 9.34% 5 Year Dividend Growth
• 29.70% Payout Ratio
• 26.24 P/E

Investment Thesis:

IFC is one of the best managed P&C insurance companies in Canada. Through a strict underwriting process and careful portfolio management, IFC has proven its value to investors over time. 

Due to its size, IFC benefits from ample amounts of data to improve its underwriting. This also allows IFC to enter smaller niche insurance markets that are usually more profitable. 

Since the insurance market in Canada is quite fragmented, there are plenty of opportunities for growth in the coming years without any real threats to the IFC business model. The acquisition of OneBeacon opened the door to U.S. business and reinforces IFC’s ability to underwrite insurance for smaller businesses. Intact did it again with the acquisition of RSA insurance for $1.25B in late 2020.

Dividend Growth Perspective:

Over the past 5 years, IFC has increased its payouts by 8% CAGR (annualized rate). The company is very cautious about its dividend increases and maintains a low payout ratio to ensure future growth. 

The stock may offer a mere 2% yield, but we remain quite positive for the future and expect a high-single digit dividend growth rate for the long-term. 

IFC increased its dividend by 20.5% (from $0.83 to $1.00/share) in 2022 and announced a share buyback program. This is a sign that the latest acquisitions have been a success and that management is confident about the coming years.

Emera (EMA.TO) – 16 Years of Dividend Increases

• 5.39% Dividend Yield
• 4.04% 5 Year Revenue Growth
• 4.66% 5 Year Dividend Growth
• 75.03% Payout Ratio
• 11.20 P/E

Investment Thesis:

Emera is an interesting utility with a solid core business established on both sides of the border. EMA now has $32 billion in assets and will generate annual revenues of about $6 billion. It is well established in Nova Scotia, Florida, and four Caribbean countries. 

This utility is counting on several green projects consisting of both hydroelectric and solar plants. Between 2022 and 2025, management expects to invest $8.4 to $9.4B in new projects to drive additional growth. These investments decrease the risk of future regulations affecting its business as the world is slowly making the shift toward greener energy sources. 

Most of its CAPEX plan (about 70%) will be deployed in Florida, where Emera is already well-established. In general, Florida offers a highly constructive regulatory environment; in other words, EMA shouldn’t have any problems raising rates. This is a “sleep well at night” (SWAN) investment.

Dividend Growth Perspective:

Emera has been increasing its dividend payments each year for over a decade. With the purchase of TECO, energy management intends to uphold this tradition. The company forecasts a 4-5% dividend growth rate through to 2025 while targeting a payout ratio of 70-75%. 

At a 4%+ dividend yield, this is a keeper for several years. Don’t be fooled by the high payout ratio as the adjusted earnings exhibit a payout ratio of approximately 80%, including recent dividend growth. This is the type of company that fits perfectly in a retirement portfolio.

National Bank (NA.TO) – 13 Years of Dividend Growth

• 4.31% Dividend Yield
• 7.94% 5 Year Revenue Growth
• 9.44% 5 Year Dividend Growth
• 36.80% Payout Ratio
• 10.19 P/E

Investment Thesis:

My personal #1 pick for 2023!

NA has targeted capital markets and wealth management to support its growth. Private Banking 1859 has become a serious player in that arena. The bank even opened private banking branches in Western Canada to capture additional growth. 

Since NA is heavily concentrated in Quebec, it concluded deals to provide credit to investment and insurance firms under the Power Corp. (POW). The stock has outperformed the Big 5 for the past decade as it has shown strong results. 

National Bank has been more flexible and proactive in many growth areas such as capital markets and wealth management. Currently, NA is seeking additional growth vectors by investing in emerging markets such as Cambodia (ABA bank) and the US through Credigy.

We wonder if it can achieve more success than BNS on international grounds. It seems like they may have found the right formula to do so! This is one of the rare Canadian stocks having a near-perfect dividend triangle.

Dividend Growth Perspective:

National Bank is still highly dependent on Quebec’s economy. As a hyper-regional bank, NA is more vulnerable to local economic events. To date, this has not affected the bank significantly, but we advise to keep track of its provisions for credit losses. 

Recessions and rising interest rates could also affect the bank’s debt portfolio. Capital markets’ revenues are also highly volatile. NA could experience a bad quarter if the stock market becomes bearish. 

Overall, the bank has performed very well, but it usually takes a little more risk to find growth vectors (such as the ABA bank investment and capital markets). So far it has paid off, but it does not mean it will always be this way in the future. Keep in mind that investments like the one in Cambodia are unpredictable and could shift very fast.

Alimentation Couche-Tard (ATD.B.TO) – 13 Years of Dividend Growth

• 0.78% Dividend Yield
• 7.78% 5 Year Revenue Growth
• 22.42% 5 Year Dividend Growth
• 12.22% Payout Ratio
• 17.35 P/E

Investment Thesis:

In the long-term, dividend payouts should grow in the double digits, and investors should see strong stock price growth. ATD’s potential is directly linked to its capacity to acquire and integrate additional convenience stores.

 Management has proven its ability to pay the right price and generate synergies for each acquisition. ATD exhibits a solid combination of the dividend triangle: revenue, EPS, and strong dividend growth. 

The company counts on multiple organic growth vectors such as Fresh Food Fast, pricing & promotion, assortment, cost optimization and network development.  It has also proven that it has anticipated the shift to electric, and is ready to profit from that model as well.

Dividend Growth Perspective:

In the long-term, dividend payouts should grow in the double digits, and investors should see strong stock price growth. 

ATD’s potential is directly linked to its capacity to acquire and integrate additional convenience stores. Management has proven its ability to pay the right price and generate synergies for each acquisition. ATD exhibits a solid combination of the dividend triangle: revenue, EPS, and strong dividend growth. 

The company counts on multiple organic growth vectors such as Fresh Food Fast, pricing & promotion, assortment, cost optimization and network development.

Royal Bank (RY.TO) – 12 Years of Dividend Increases

• 4.40% Dividend Yield
• 3.98% 5 Year Revenue Growth
• 7.34% 5 Year Dividend Growth
• 44.68% Payout Ratio
• 11.87 P/E

Investment Thesis:

Royal Bank counts on many growth vectors: its insurance, wealth management, and capital markets divisions. 

These sectors combined now represent over 50% of its revenue. These are also the same segments that helped Royal Bank to stay the course during the pandemic. 

The company has made significant efforts in diversifying its activities outside of Canada and has a highly diversified revenue stream to offset interest rate headwinds. Canadian banks are protected by federal regulations, but this also limits their growth. Having some operations outside of the country reduces risk and improves growth potential. 

The bank posted solid results for the latest quarters driven by strong volume growth while successfully managing higher provisions for credit losses. As interest rates rose in 2022, RY maintained a good position. Royal Bank exhibits a perfect balance between revenue and growth.

Dividend Growth Perspective:

Royal Bank has traditionally increased its dividend twice per year. Under normal circumstances, an investor can count on two low-single-digit dividend increases each year. The bank paused its dividend growth policy between 2008 and 2010 but returned with double-digit dividend growth increases in 2012.

Regulators put a hold on dividend increases for all banks in 2020 and lifted it in late 2021. Royal Bank went with a generous dividend increase of $0.12/share or 11%. In 2022, the company returned to its habit of raising its dividend twice per year. We expect mid-single digit dividend increases going forward (e.g. between 2% and 3% increases, twice a year).

Canadian Dividend Stocks with 10 Years of Dividend Increases

The last few years have seen intense change and turmoil. The COVID-19 pandemic has forced us to review each company in our portfolio and review their business model. 

Now inflationary concerns have added to the negative headlines.

Dividend Investing in Canada – Frequently Asked Questions

“How do dividend stocks work?”

Simply put, dividends are the payment that businesses make to their owners after expenses have been paid for during a specific time period.  Some companies produce yearly dividends, but most pay “quarterly” (every three months). 

Most dividend-heavy companies (certainly all of the Canadian dividend stocks on the list above) announce their dividend intentions for the next year, and then split up their after-tax profit between dividends and retained earnings. The retained earnings are put back into the company in one form or another, while dividends are simply paid out to shareholders. 

Companies can “slash” or cut their dividend whenever they wish – there is no law saying they must pay out a certain percentage of profit or anything like that. Consequently, there is often an emphasis on long-time dividend growth stocks that have a proven track record of not only paying out dividends, but increasing them as time goes on, and thus rewarding shareholders.

“How is a dividend being paid?”

Dividends are paid to shareholders. They are paid out on a per-share basis, and for each share you own as an investor, you get paid a certain amount. This amount is most commonly expressed a percentage of the current price of a stock. 

So for example, you might hear, “Enbridge currently has a dividend ratio of 8%.” This simply means that if Enbridge’s current stock price was $40, (.08 x 40 = $3.20) an investor would expect to earn $3.20 in dividends from Enbridge for the upcoming year. That $3.20 would likely come to them in four separate installments of $0.80.

Companies can also announce “Special Dividends” at any time. In this situation, there is a unique one-time payout to shareholders.

In order to qualify for a dividend you must purchase a share before the “ex-dividend date” – which is announced by each company fairly far in advance.

“How to buy dividend stocks in Canada?”

While you can still buy dividend stocks through the old fashioned telephone brokerage systems, the vast majority of investors now purchase dividends as DIY investors using their discount brokerage accounts. 

At Million Dollar Journey, we have put together dozens of reviews and comparisons pieces destined to provide our readers with insights regarding the best Canadian broker for long term investing.

Read about the most popular brokers like Qtrade and Questrade as well as robo-advisors like Wealthsimple and learn how to maximize your savings in that regard.

The other common way to get portfolio exposure to Canada’s best dividend stocks is through dividend-ETFs on the Toronto Stock Exchange (TSX).  Using a dividend ETF provides your investment dollar with instant diversification to companies that have a strong dividend profile.

“When to buy dividend stocks?”

The honest answer is: “Any time you have the investing funds available to do so”.  There are many folks out there who think that they can time the market and purchase stocks at the absolute perfect time.  Despite that belief, there is very little evidence that this is true. 

It’s also quite difficult to time when stocks are nearing the peak.  Consequently, the most successful dividend investors that I’ve seen are folks who stick to a pre-planned strategy and simply invest their surplus funds as soon as they are able, into shares of dividend-payers that they have done their homework on and anticipate holding for the long term.

“When is the time to sell dividend stocks?”

If you are like Warren Buffett and buy stocks that, “You want to hold forever” – then the answer to when you should sell your dividend stocks is: Never!  In practice, there are a few times over the past 15+ years when companies have significantly cut their dividend, and to me, this is a flashing red sign that something is majorly wrong with the company.

Cutting a dividend is usually seen as a last resort because it has such a dramatic effect on the stock price. Major shareholders hate the idea of sacrificing that cashflow – so when the decision is made, I usually sit up and take notice. 

That said, I prefer to do my homework before purchasing any single stock. Consequently, I almost never sell my dividend stocks, because I am quite confident in their long-term growth.  You can read my articles about Canadian dividend kings and beating the TSX for some specific suggestions.

The statistics around trying to jump in and out of the market just aren’t very good, and it really pays to be confident in your reasons for choosing a stock – so that you can not only hang on to your shares during tough times in the market – but also “Be fearful when others are greedy” and buy more shares of your favourite dividend stocks when prices are down.

“What are the best dividend stocks?”

Well, clearly if you’ve read this far into our article you know what our choices are for best Canadian dividend stocks!  After years of personal dividend investing and research, I’ve come to the conclusion that the Dividend Stocks Rock way of judging dividend stocks by their “Dividend Triangle” is the best long-term way to value solid Canadian companies.  The main idea is to equally weight a company’s overall revenues, their Earnings-Per-Share (EPS), and their commitment to dividend growth over the long term.

I used to simply look at dividend yield as the “be-all and end-all” of dividend investing, but Mike has convinced me over the years that your long-term dividend payouts and capital gains are more secure by focusing on the three metrics of revenues, earnings, and dividend growth.

“Are there tax benefits for dividend stock investing in Canada?”

Gaining income from dividend stocks is one of the most tax-efficient ways that you can put your 

money to work for you.  This is especially true at lower income levels (such as those that many retirees typically account for at the end of the year) when the dividend tax credit really shines.

If you’ve never heard of the dividend tax credit or the dividend gross up, here’s the basic idea:

1) There are actually two different dividend tax credits: the Provincial Dividend Tax Credit and the Federal Dividend Tax Credit

2) The reason for these tax credits is rooted in the idea of tax fairness.  Because businesses pay corporate taxes before money is disbursed to shareholders, there is a process where your dividend income is “grossed up” and then a tax credit applied.

3) What this so-called “gross up + tax credit” often looks like in practice is that your income gets artificially inflated, but then a very generous amount of your taxes owing is cancelled by the government.

Here’s an example:

If I owned 1,000 shares of Enbridge (ENB) during 2020, and earned $3.20 for each share, then my dividend income would be $3,200.

Now, depending on what other income that I had, I would be placed in a specific tax bracket.  Obviously I might have dividend income from other stocks, I might also have worked for a living and have earned income.

If I made $60,000 in earned income, and Enbridge was the only stock that I owned, then the following calculation would be made for my dividend income:

$60,000 of earned income would be taxed by the federal government at a rate of 0% on the first $13,000, then a rate of 15-20.5% on the rest.  My $3,200 in Enbridge dividends would only be charged a tax rate of 7.56% after the dividend gross up and dividend tax credit were applied.

Looking at the provincial side of the equation.  If I lived in Ontario, my $60,000 of earned income would be taxed at a rate of 0% on the first $10,000, then a rate of 20-30% on the rest.  My $3,200 in Enbridge dividends would only be charged a tax rate of 

For many retirees, who no longer earn a paycheque, it’s possible to actually experience a negative tax rate on the first $30,000 or so of dividend payments – less than a 0% tax rate!

Most Recent News on Canadian Dividend Stocks

The truth is that we’re in an unprecedented time when it comes to the aftershocks of aggressive fiscal and monetary policy.  Interest rate increases appear to be working, and inflation has plummeted – but I would be very suspicious of anyone who tells you that they are 100% sure they know what the future holds in terms of central bank decisions.

There’s no doubt that all of the talk of “higher for longer” interest rates is affecting several of our top Canadian dividend stocks in 2023.  When you can get an ultra-safe risk-free GIC [See Our Best GIC Rates In Canada] with an automatic 5.60% return, the risk-reward balance of Canada’s utilities, pipelines, or telecommunications companies has been significantly altered.

You no longer hear much talk of “There Is No Alternative” (“TINA”) – because there is now definitely an alternative!

The other factor that has been waying down some of the projected earnings for Canadian dividend stocks so far in 2023 is that the “higher for longer” interest rate forecast means an increased cost line for debt-heavy businesses like telecoms and pipelines.  We saw Alongquin melt down at the end of 2022 mostly due to this reality.

In short – 2023 has not been the most rewarding time to be a Canadian dividend investor.  That said, it’s important to remember that these companies we are recommending have durable long-term competitive advantages. 

For example, look how hard it has been to get a single pipeline built – along a previously-existing route – in BC. They aren’t building more pipelines, telecoms, utilities, or major banks in Canada. Those profit margins might be hindered a bit by higher interest costs, but they’re still very sustainable.

As a sidenote, I think that the rush to buy the US Dollar (and its appreciation against the Canadian Dollar) is actually really good for the Canadian economy.

What many people don’t realize is that while a weakening currency vs our most important trading partner (by far) is kind of a drag when it comes to planning holidays or importing goods, it’s incredibly valuable to our companies. Canadian goods and services are effectively getting priced at a discount right now for the largest consumer market on the planet!

Canadian energy companies, plus companies like Nutrien, Cameco, gold miners, and agricultural producers have benefited from increased demand for their products. I don’t see this stopping any time soon, but who knows what mercurial European leaders will do in the current extreme circumstances.

As always, it’s important to focus on dividend growth, overall company revenues, and effective management that builds value. I remain rock-solid in my personal conviction for this portfolio.  The advantages the companies hold are too good, the current valuations quite reasonable, and they have simply proven themselves over and over again in all market conditions.

Our Recent Dividend Track Record

At the beginning of 2021 we predicted that Canada’s midstream companies were getting way too much bad press and that their value was being driven down by the underlying price of commodities like oil and natural gas. 

We thought there was a market inefficiency there as the pipelines only have a loose relationship between commodity prices and their profit margin. Our top Canadian dividend stock pick was Enbridge, and it paid off quite well for us.

While our midstream dividend standouts continue to post steady-as-she-goes increases in profit, the pure oil companies have gushed profits and special dividends the last few years. Personally, I don’t want to build my portfolio around the price of oil.

Sure, growth might pick back up, and supply issues could still continue, and prices will go right back up as well. On the other hand, price signals could result in a substantial boost to supply, and it might be a couple of years before demand gets back to where it was.

While our Canadian dividend kings continue to chug along, I continue to believe in my overall Dividend King Pick of National Bank. Its low P/E of 10.6, plus an incredibly low payout ratio of 37%, plus the strong regional Quebec economy (where NB is based – and which chose to re-elect a business-friendly government), all add up to an excellent value play. 

Overall, the 6th biggest bank in Canada continues to be a stock with a very low floor (thanks to a very solid balance sheet and massive competitive advantage in Quebec), with a relatively high ceiling versus Canada’s other banks due its small market cap. Management has shown a commitment to rewarding shareholders over the long term and I don’t see any reason to believe that commitment will change given their most recent earnings report.

I’m stacking up well against the benchmarks, and I’m even beating my dividend buddy Mike Heroux for a couple of his portfolios (and admittedly, losing to him on several more… I might have to start riding his coattails even more).  See below for his publicly-posted track record over the last decade:

Further Research on Top Canadian Dividend Stocks

While I focused on Canadian dividend growth stocks in this article, when I want information on anything dividend-related (including US dividend stocks and undervalued dividend stocks) I also use the Dividend Stocks Rock (DSR) service by Mike Heroux. 

Mike is a longtime Canadian writer who started at the same time as myself. He is a CFA and former financial adviser. In the past I’ve subscribed to premium Globe and Mail channels, as well as popular investment newsletters such as Morningstar – Mike’s final product is simply the best. 

These days he specializes in not only researching Canada’s best dividend stocks, but also communicating the results of that research in creative, easy-to-understand ways.