My Top 10 Canadian Dividend Stocks

As a dividend investor my primary goal is building passive income through dividends. I have developed my own strategy which was focused on steady and increasing dividends. The last 10 bullish years ending in 2019 have provided excellent returns for many investors.

However, most of the Canadian stocks in my portfolio have been exposed heavily to the Financial Services, Energy sector, and REIT’s. We realized that our portfolio was not well-diversified. As a result, we started new positions on these Canadian dividend stocks which were already on our watch lists.

Here’s my top 10 Canadian Dividend Stocks:

  1. Canadian National Railway (CNR)

Canadian National Railway Company engages in the rail and related transportation business. The company includes an extensive transport portfolio such as petroleum and chemicals, fertilizers, coal, metals and minerals, forest products, grain, and automotive products. It operates a railroad track in Canada and mid-America ranging from the Atlantic and Pacific oceans to the Gulf of Mexico. Canadian National Railway Company was founded in 1919 and is headquartered in Montreal, Canada.

  • Sector: Industrial
  • Dividend Yield: 1.95%
  • PE Ratio: 19.08
  • Dividend Payout Ratio: 35.45%
  • 5 Year Dividend Growth Rate: 17%
  • Dividend Growth Streak: 23 years

CNR is a well-diversified company. None of its products and services accounted for over 25% of the total revenues. Additionally, rail still is Canada’s most efficient way to transport goods. CNR’s current yield of 1.96% is above it’s 5 year average of 1.74% which suggests that the stock could be attractively valued.

  1. Enbridge Inc. (ENB)

Enbridge Inc. operates as an energy infrastructure company in Canada and the United States. The company operates through five segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution, Green Power and Transmission, and Energy Services. Enbridge Inc. was founded in 1949 and is headquartered in Calgary, Canada.

  • Sector: Energy
  • Dividend Yield: 7.61%
  • PE Ratio: 16.87
  • Dividend Payout Ratio: 112.24%
  • 5 Year Dividend Growth Rate: 16%
  • Dividend Growth Streak: 24 years

Like many of the Energy sector, ENB is experiencing difficulties. Oil prices have hit it’s 20-year lows after the world’s biggest producers ramped up production and flooded the market. Oil producers made a decision to stop pumping as storage became the major issues in oversupply.

Demand could increase by the end of coronavirus lockdown. However, full recovery looks increasingly unlikely. ENB’s current yield is 7.3% above it’s 5 year average of 5.13% and if you believe the long-term prospects are still good as they were in recent years and dividends are still safe then it could be a reasonable time to invest.

  1. Toronto-Dominion Bank (TD)

The Toronto-Dominion Bank, together with its subsidiaries, provides various personal and commercial banking products and services in Canada and the United States. The company operates through three segments: Canadian Retail, U.S. Retail, and Wholesale Banking. The Toronto-Dominion Bank was founded in 1855 and is headquartered in Toronto, Canada.

  • Sector: Financial Services
  • Dividend Yield: 5.24%
  • PE Ratio: 9.15
  • Dividend Payout Ratio: 52%
  • 5 Year Dividend Growth Rate: 9%
  • Dividend Growth Streak: 9 years

The financial services such as the big banks which were considered to be as a safe haven for dividend investors were also not immune to the market crash. The risks of mortgage payment defaults are at an all time high, when many people are laid off and out of work. This is also true for banks who offer loans to businesses. A positive note for TD is that their exposure to loans to the Energy and Gas sector are among the lowest at 1.3% compared to other big banks.

TD’s current dividend yield is 5.64% which is above it’s 5 year average of 3.76% which suggests that the stock is undervalued and a good entry point.

  1. Canadian Utilities Limited (CU)

Canadian Utilities Limited and its subsidiaries engage in the electricity, pipelines and liquids, and retail energy businesses worldwide. It operates through Electricity, Pipelines & Liquids, and Corporate & Other segments. The Electricity segment provides electricity generation, transmission, and distribution; and related infrastructure solutions in Alberta, Ontario, the Yukon, the Northwest Territories, in Canada, as well as in Australia and Mexico. The company was incorporated in 1927 and is headquartered in Calgary, Canada. Canadian Utilities Limited is a subsidiary of ATCO Ltd.

  • Sector: Utilities
  • Dividend Yield: 4.97%
  • PE Ratio: 10.82
  • Dividend Payout Ratio: 89%
  • 5 Year Dividend Growth Rate: 10%
  • Dividend Growth Streak: 10 years

A utility stock is an investor’s best friend whatever market conditions we are facing. We don’t cut back on heating and running our appliances such as refrigerators during a recession. Its demand is stable throughout the economic cycle.

  1. Telus Corporation (T)

TELUS Corporation, together with its subsidiaries, provides a range of telecommunication products and services in Canada. It operates through Wireless and Wireline segments. The company’s telecommunication products and services comprise wireless and wireline voice and data services; data services, including Internet protocol; television services; hosting, managed information technology, and cloud-based services; healthcare solutions; customer care and business services; and home and business security solutions. TELUS Corporation was founded in 1993 and is based in Vancouver, Canada.

  • Sector: Communication Services
  • Dividend Yield: 5.11%
  • PE Ratio: 15.96
  • Dividend Payout Ratio: 77%
  • 5 Year Dividend Growth Rate: 8%
  • Dividend Growth Streak: 16 years

With people staying indoors due to lockdown, cable television and the internet are our way of entertainment and communication with the outside world. This COVID 19 pandemic and with still no vaccine that has been tested and approved – working from home could be the new normal for many of individuals. Telus current dividend yield 5.03% is above the 5 year average of 4.44% which indicates that it is a reasonable time to invest.

  1. Saputo Inc. (SAP)

Saputo Inc. produces, markets, and distributes dairy products in Canada, the United States, Argentina, Australia, and internationally. The company offers cheeses, including mozzarella and cheddar. In addition, the company offers dairy ingredients, including milk powder, whey powder, lactose, and whey protein concentrates; and distributes fine imported cheese to specialty stores. Saputo Inc. was founded in 1954 and is headquartered in Montréal, Canada.

  • Sector: Consumer Defensive
  • Dividend Yield: 1.92%
  • PE Ratio: 23.04
  • Dividend Payout Ratio: 43%
  • 5 Year Dividend Growth Rate: 7%
  • Dividend Growth Streak: 19 years

Food is a basic need. We don’t stop to eat even during lockdown and with the looming recession. Saputo’s current dividend yield of 1.90% is above it’s 5 year average of 1.53% which suggests that the stock may be undervalued.

  1. Alimentation Couche-Tard Inc. (ATD.B)

Alimentation Couche-Tard Inc. operates and licenses convenience stores. It operates and  manages licensed stores in North America, Ireland, Scandinavia, Poland, the Baltics, and Russia. It also has stores, which are located in Cambodia, China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates, and Vietnam. Alimentation Couche-Tard Inc. was founded in 1980 and is headquartered in Laval, Canada.

  • Sector: Consumer Defensive
  • Dividend Yield: 0.70%
  • PE Ratio: 21.64
  • Dividend Payout Ratio: 10.28%
  • 5 Year Dividend Growth Rate: 22%
  • Dividend Growth Streak: 14 years

Alimentation Couche-Tard Inc stores are the kind of businesses that are still open and running through this pandemic crisis which indicates how resilient these companies are even during recession. Their yield might not be attractive to dividend income investors, however, the company’s financials are excellent. The company has very minimal debt and with a very fast dividend growth rate which is ideal for long term investors.

  1. Bank of Nova Scotia (BNS)

The Bank of Nova Scotia provides various banking products and services in Canada, the United States, Mexico, Peru, Chile, Colombia, the Caribbean and Central America, and internationally. It operates through Canadian Banking, International Banking, Global Banking and Markets, and Global Wealth Management segment.  The Bank of Nova Scotia was founded in 1832 and is headquartered in Toronto, Canada.

  • Sector: Financial Services
  • Dividend Yield: 6.22%
  • PE Ratio: 8.51
  • Dividend Payout Ratio: 51.98%
  • 5 Year Dividend Growth Rate: 6%
  • Dividend Growth Streak: 9 years

BNS is one of the first bank stocks that I hold. Their heavy exposure to South America may pose financial risks when businesses are unable to fulfill their mortgage and loan payments due to the effects of the coronavirus pandemic. However, BNS has relatively less exposure to Canada’s real estate market compared to its peers. Today, each of the large Canadian banks appears to have healthy fundamentals and their dividends appear to be safe.

BNS current dividend yield of  6.75% is above it’s 5 year average of 4.41% which indicates the stock may be undervalued.

  1. Restaurant Brands International Inc. (QSR)

Restaurant Brands International Inc. owns, operates, and franchises quick service restaurants under the Tim Hortons (TH), Burger King (BK), and Popeyes (PLK) brand names. The company operates through three segments: TH, BK, and PLK. Restaurant Brands International Inc. was founded in 1954 and is headquartered in Toronto, Canada.

  • Sector: Consumer Cyclical
  • Dividend Yield: 4.25%
  • PE Ratio: 30
  • Dividend Payout Ratio: 84.39%
  • 5 Year Dividend Growth Rate: 46%
  • Dividend Growth Streak: 7 years

If you love coffee and hamburger, what is not to like Tim Hortons and Burger King? It is a household name known to many Canadians and around the world. QSR’s current dividend yield of 4.14% is above it’s 5 year average of 1.48% which indicates that it may be undervalued and a good entry point.

  1. Andrew Peller Limited (ADW-A)

Andrew Peller Limited produces and markets wine, spirits, and wine related products. The company’s principal products include blended table wines, sparkling and fortified wines, and varietal wines, as well as icewines. It offers wines under various trademarks and is distributed in authorized retailers, and 500 independent retailers in Canada, the United States, the United Kingdom, New Zealand, Australia, and China. The company was formerly Andrew Peller Limited was founded in 1961 and is headquartered in Grimsby, Canada.

  • Sector: Consumer Defensive
  • Dividend Yield: 2.35%
  • PE Ratio: 17.15
  • Dividend Payout Ratio: 37.31%
  • 5 Year Dividend Growth Rate: 9%
  • Dividend Growth Streak: 13 years

While restaurants, pubs, and bars are still currently closed, this has not stopped people from consuming alcohol. In fact, a poll has shown that there is an increase in alcohol consumption that many people are staying indoors. As an investor, I am just glad to be a partner of their business and looking forward to my first glass of wine when restaurants will start to receive their first customers.

My Final Thoughts

Like many dividend investors, I continue to evolve with my investing strategy myself. While investing for almost 10 years my strategy is far from perfect. Learning is not a linear process and I’ve learned many mistakes along the way. In order to improve results, one should be able to adapt to market conditions.

As a result, I’ve adjusted my strategy and added Canadian stocks to our portfolio with lower yield but have higher dividend growth.

Updated TFSA Dividend Portfolio.

Note: This blog post represents my opinion only and should not be considered as a recommendation to buy these stocks. Whatever decisions you make, you should exercise due diligence.

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