The best Canadian dividend stocks offer investors a consistent return and the potential for capital gains over time.
Since Canadians can make money tax-free using TFSA and RRSP accounts, dividend investing has become one of the most popular avenues for individuals to earn a passive income in Canada.
In this article, we’ll go over everything that you need to know about investing in dividend stocks in Canada.
Read on to learn how to earn a passive income by investing in the best Canadian dividend stocks.
How To Buy The Best Canadian Dividend Stocks in 2022
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Top 10 Canadian Dividend Stocks in 2024
More than ever, Canadian investors are in need than ever for steady, dependable dividend streams.
War and inflation have shaken markets around the world and caused increases in prices for energy, gas, and goods
Current market volatility means traditional capital gains are difficult to achieve.
Check out our list of the top 10 Canadian dividend stocks in 2024. Click to jump to a stock.
- Fortis (FTS.TO)
- Enbridge (ENB.TO)
- Canadian National Railway (CNR.TO)
- Telus (T.TO)
- Emera (EMA.TO)
- National Bank (NA.TO)
- Alimentation Couche-Tard (ATD.B.TO)
- Algonquin Power & Utilities (AQN.TO)
- Royal Bank (RY.TO)
- Intertape Polymer (ITP.TO)
1. Fortis (FTS.TO)
Many investors are looking for ways to stabilize their portfolios, and Fortis Inc. (FTS.TO) offers just that.
Fortis has a strong history of dividend growth, making it an attractive choice for income-oriented investors.
The stock currently yields 3.67%, and the payout ratio is a manageable 79.85%. In addition, the company has posted strong revenue growth over the past five years, and analysts expect this trend to continue.
With a P/E of 22.06, Fortis is trading at a reasonable price given its solid fundamentals.
2. Enbridge (ENB.TO)
Enbridge (ENB.TO) is an energy infrastructure company with a strong dividend yield and solid growth prospects.
The company has a strong track record of revenue and dividend growth, and its payout ratio is 117.23%. However, the stock is not without risk. Its P/E ratio is 22.30, which means that it is trading at a premium to its peers.
However, given its strong performance in recent years, Enbridge may be worth considering for investors looking for a reliable dividend stock.
3. Canadian National Railway (CNR.TO)
If you are looking for the best Canadian ETF stocks, Canadian National Railway is a solid investment with a lengthy history of dividend growth.
This company has seen 26 years of consecutive dividend increases, and it currently boasts a dividend yield of 1.90%. Canadian National Railway has shown strong revenue growth over the past five years, with an impressive 5-year growth rate of 3.76%. and a 10.40% 5-year dividend growth rate.
However, it’s important to note that the company does have a relatively high payout ratio of 35.57%.
Nonetheless, Canadian National Railway is a well-established company with a long track record of success, making it a safe investment for anyone looking for stability and dividend growth.
4. Telus (T.TO)
Telus is a Canadian telecommunications company that provides a wide range of services, including wireless, TV, internet, and home phone.
The company has a strong history of dividend growth and currently offers a dividend yield of 4.58%. Furthermore, Telus has posted 5-year revenue and dividend growth rates of 5.76% and 6.68%, respectively.
While the company’s payout ratio is high at 103.38%, this is primarily due to the significant amounts of cash generated by the business.
When compared to its peers, Telus trades at a discount, with a P/E ratio of 22.10. For these reasons, we believe that Telus is an attractive investment for income-seeking investors.
5. Emera (EMA.TO)
Emera Inc. (EMA.TO) is a leading electric and gas utility company with operations in Canada, the United States, and Brazil.
The company has a long history of consistent dividend growth, and currently offers a dividend yield of 4.31%. Additionally, Emera has posted strong revenue growth over the past five years, with an average annual growth rate of 6.15%.
Furthermore, the company’s payout ratio is very sustainable at 128.82%.
Given all of these factors, Emera is an attractive option for investors looking for stability and income potential.
6. National Bank (NA.TO)
Investors looking for exposure to the Canadian banking sector may want to consider the National Bank of Canada (NA.TO).
The company has a strong dividend yield of 4.23% and has demonstrated consistent growth over the past five years, with 5-year revenue and dividend growth rates of 8.14% and 5.43%, respectively. The payout ratio is currently reasonable at 31.37%.
While the P/E ratio is slightly higher than some of its peers, at 8.94, this is still within a normal range, and investors are likely to see continued growth from National Bank in the future.
7. Alimentation Couche-Tard (ATD.B.TO)
Alimentation Couche-Tard is a retail company that operates in the convenience store industry.
The company has a market capitalization of $51.4 billion, making it one of the largest companies in the sector.
The company has a strong dividend growth history, with a 5-year dividend growth rate of 18.74%. Additionally, the company has a low payout ratio of 12.30%, indicating that the dividend is well-covered by earnings.
The stock trades at a 16.83 P/E, which is below the sector average of 23.61.
We believe that Alimentation Couche-Tard is an attractive investment for income investors seeking exposure to the retail sector.
8. Algonquin Power & Utilities (AQN.TO)
Algonquin Power & Utilities is an ETF that offers investors a high dividend yield and strong growth prospects.
The company has a 5-year revenue growth rate of 21.53%, and its dividend has grown by 8.79% over the same period. Given its strong performance, Algonquin Power & Utilities is an attractive investment for income-seeking investors.
In addition, the company’s payout ratio is at a relatively low of 165.34%, indicating that its dividend is sustainable. Algonquin Power & Utilities trades at a P/E of 47.10, which is below its historical average.
As such, the ETF offers investors an attractive blend of value and growth prospects.
9. Royal Bank (RY.TO)
For income investors looking for a reliable dividend stock, Royal Bank (RY.TO) is a great option.
The company has increased its dividend each year for the past 11 years, and it currently boasts a dividend yield of 4.20%.
Royal Bank has also shown strong revenue growth over the past 5 years, with an annual growth rate of 5.67%. The company’s dividend has grown by an average of 5.92% per year over the past 5 years.
With a payout ratio of just 39.02%, Royal Bank appears to have plenty of room to continue increasing its dividend in the years ahead.
Given its strong track record of dividend growth and relatively low payout ratio, Royal Bank looks like an attractive option for income investors.
10. Intertape Polymer (ITP.TO)
Intertape Polymer is a company that manufactures and sells paper products and packaging materials.
Their products are used in a variety of industries, including food, beverage, pharmaceutical, and automotive. Intertape Polymer has a strong history of growth, with revenue increasing by 12.40% over the last 5 years.
They have also been consistently increasing their dividend, with a 5-year dividend growth rate of 2.78%. Right now, their dividend yield is 2.18%.
With a 57.14% payout ratio, there is room for further dividend growth in the future. Intertape Polymer’s stock is currently trading at a P/E of 28.14.
Given its strong history of growth, Intertape Polymer is an attractive investment for long-term investors seeking to generate income from dividends.
Other Canadian Dividend Stocks To Keep An Eye On
| Name | Ticker | Guidance | Rating | Forward Dividend Yield |
|---|---|---|---|---|
| IGM Financial Inc | IGM | Narrow | ★★★★ | 6.33% |
| Great-West Lifeco Inc | GWO | None | ★★★★ | 6.26% |
| AGF Management Ltd | AGF.B | None | ★★★★ | 6.14% |
| Manulife Financial Corp | MFC | None | ★★★★ | 5.96% |
| Power Corporation of Canada | POW | None | ★★★★ | 5.82% |
| Enbridge Inc | ENB | Narrow | ★★★ | 6.33% |
| BCE Inc | BCE | Narrow | ★★★ | 5.79% |
| Bank of Nova Scotia | BNS | Narrow | ★★★ | 5.36% |
| Keyera Corp | KEY | None | ★★ | 6.45% |
| Pembina Pipeline Corp | PPL | None | ★ | 5.56% |
What Is A Dividend Stock In Canada?
A dividend stock is a stock that offers payments (or dividends) to shareholders.
Dividends are used by companies to share profits with their shareholders and may be paid out on a monthly, quarterly, semi-annual or yearly basis, although most pay quarterly.
Most dividend-heavy companies split their after-tax profit between dividends and retained earnings. The retained earnings are put back into the company, while dividends are simply paid out to shareholders.
Companies are not legally obligated to pay out a certain percentage of profit. They can increase or reduce their dividend whenever they wish. This is why investors need to select companies with proven track records of paying out dividends and increasing them as time goes on.
Unlike penny stocks, most dividend stocks are generally considered safer investments because they guarantee a return over time.
What Is A Dividend Yield?
Dividend yield is a stock’s annual dividend payments to shareholders expressed as a percentage of the stock’s current price. The yield is an indicator of future dividend income from a stock based on today’s share price.
One thing to note is that a stock’s dividend yield can change over time as a result of market fluctuations or company decisions.
What Is An Ex-Dividend Date?
The concept of an ex-dividend date is also something that investors need to be familiar with.
It is the date on which all shares purchased and sold no longer qualify to be paid the recently declared dividend.
In other words, before this date, the stock is “cum dividend” and existing holders of the stock and anyone who buys the stock prior to this date will receive the dividend. Meanwhile, shareholders that sell the stock before the date will lose their right to receive dividend.
After this date, the stock becomes “ex-dividend” and existing holders of the stock will continue receiving dividends even if they sell the stock, whereas anyone who buys the stock will not receive the dividend.
What Are The Advantages of Investing In Canadian Dividend Stocks?
There are numerous advantages of investing in Canadian dividend stocks.
One big advantage is the tax implications that come from investing in such stocks. A focus on Canadian dividends means a reduced tax on the overall returns from a stock in the form of dividend tax credit. In contrast, a focus on dividend stocks from outside of Canada may mean extra tax for investors.
While buying Canadian dividend stocks may provide investors with a fantastic opportunity, it is important to note, as with any other form of investment, risks associated with purchase of Canadian dividend stocks. The cost of dividend payouts is lower returns- while this may not necessarily be true for all Canadian dividend stocks, as evidenced by our recommended list of best Canadian dividend stocks, dividend paying stocks tend to yield lower returns in general.
Below is a chart summarizing the pros and cons of investing in dividend stocks in Canada:
|
Advantages |
Disadvantages |
| ✅ Better performance: On average, Canadian dividend stocks perform better long-term than those without dividends, making them better long-term investments |
❌ Dividend caps: |
|
✅ Reliable income stream: |
❌ Random stoppage: There are no regulations against companies stopping dividend payouts for investors. A company can exercise its right to stop paying out dividends at any time |
| ✅ Protection from stock market fluctuations: Dividend stocks paying dividends are more protected from stock market fluctuations as they pay out based on annual projections rather than current market performance. |
|
|
✅ Fight inflation: |
|
| ✅ Reinvest dividends: Dividend payouts can be used by investors to use for personal use or reinvest in the same or another stock, which in turn, helps deliver steady returns on investment. |
How Do Dividends Work in Canada?
Dividends are paid out according to the number of shares a shareholder holds. Dividends are paid in varying time periods, including monthly, quarterly (most popular), and twice annually. Dividends are paid out when a company has additional cash available that it is not reinvesting into the company. This additional cash is taxed and subsequently divided among shareholders for payment.
Typically, companies declare, or announce, their dividends per share to qualified shareholders via press releases, which feature the following:
⦁ Declaration Date — The date when the dividend is declared.
⦁ Record Date — Company review of shareholders who are eligible to receive dividend payments.
⦁ Payment Date — The date when shareholders receive their dividend payment.
⦁ Ex-Dividend Date — The date after which shareholders who trade shares are not entitled to the upcoming dividend payment.
Most companies that pay dividends usually have solid cash balances and are considered stronger businesses. Dividend-paying stocks are often preferred by risk-averse investors.
Why Buy Canadian Dividend Stocks?
If you want to establish a reliable flow of passive income and build wealth over time, buying Canadian dividend stocks can be a great investment strategy.
Adding some of the top Canadian dividend stocks to your portfolio will help lower volatility and enhance the total stock market returns in your account.
But why should Canadian investors consider buying dividend stocks?
Well, the best Canadian dividend stocks provide two sources of passive income: a regular return from dividend payments and capital appreciation over time.
As of Q3 2022, Canadian stocks in markets with limited competition continue to declare dependable dividend growth.
In terms of sectors, the best Canadian stocks in banking, utility, and telecommunication sectors in particular have proved to be quite resilient and held up relatively well, despite challenging market conditions.
The reported earnings of companies within these sectors have supported the long-term viability of their dividends.
Some of the leading Canadian dividend growth stocks are Fortis Inc. (utilities), Enbridge (energy), Telus Corp (communications), and National Bank of Canada (banking) among others.
The key metrics that were used to assess these stocks are dividend yield, 5-year revenue growth, 5-year earnings per share (EPS) growth, 5-year dividend growth, payout ratio, and P/E ratio.
Read on to learn more about how to choose the best dividend stocks to buy in Canada right now.
How to Choose the Best Canadian Dividend Stocks to Buy and Hold
When deciding on the best Canadian dividend stocks to buy right now, it’s important to consider a number of different factors, including the dividend yield and dividend payout ratio.
Investors should also consider things like the cash dividend payout ratio, P/E ratio, and earnings per share (EPS), along with the quality of growth, overall profitability, and potential for dividend growth.
Finally, debt sustainability, the company’s history, and its plans to grow sustainably in the future should also be considered.
Dividend Yield
The dividend yield is a stock’s annual dividend payment, which is expressed as a percentage (%) of the stock’s current prices and provides an estimation of a dividend stock’s return on investment.
Dividend income is a very important part of generating long-term stock market returns, which makes certain stocks better picked over others for your portfolio.
In order to use this to your advantage, as part of your research, look at the yield of any particular dividend stock in Canada.
To start, look for some Canadian stocks with a higher dividend yield, all other things being equal.
However, don’t look at this metric in isolation, as an unduly high dividend yield could be a pointer to some potential problem with a company’s stock, financial statements, or news reports.
Instead, consider the dividend yield alongside the companies’ ability to sustain or consistently maintain the dividends paid to shareholders over the long term. This can be gauged by the dividend payout ratio.
Dividend Payout Ratio
This ratio shows how much of a company’s net income is paid out to its shareholders.
Generally speaking, the lower the dividend payout ratio, the more sustainable the dividend payment will likely be.
Cash Dividend Payout Ratio
In order to gain a deeper insight into whether a stock will be able to sustain its dividends, investors can start by looking at the company’s cash dividend payout ratio and dividend payout ratio.
This ratio is the dividend as a percentage of a company’s operating cash flows minus capital expenditures or what is termed as free cash flows.
It is an important metric, as a company’s free cash flows can change substantially from one period to the next.
Such variability in cash flows can sometimes make a company’s dividend payout ratio misleading. Therefore, investors should also look at the cash dividend payout ratio too.
P/E Ratio and EPS
Another way that smart investors try to identify the best Canadian dividend stocks is to find stocks that have low share prices relative to a company’s earnings.
This can be done by looking at a company’s P/E ratio and earnings per share (EPS).
This ratio is arrived at by dividing the company’s stock price by its EPS.
Investors can use this ratio, along with the dividend yield to evaluate if the Canadian dividend stocks that they wish to buy are fairly valued.
The P/E ratio is one of the key ratios that investors can use to value shares.
However, investors in Canada must be careful with this ratio, as earnings can be volatile from one year to the next.
Therefore, it is recommended that you compare the stock price of a particular Canadian dividend stock against an average of the company’s earnings over a couple of years rather than earnings in a single year.
With that in mind, companies that have demonstrated the ability to regularly enhance or increase earnings per share (EPS) over time, and by extension increase their dividends, are the best dividend stocks.
If a company has been able to demonstrate consistent earnings growth, this often indicates that it has sustainable long-term competitive advantage which will probably help it increase its earnings and dividends in the future too.
Growth, Profits, and Dividends
Another way to value Canadian companies is to look for those that have produced consistent and repeated high-quality growth. Instead of looking at companies on a year-over-year basis, investors should look for companies that have shown increasing profits and dividends over the last 10 years.
The implication here is that these companies are more likely to have the ability to maintain, sustain, or pay a higher stream of dividends in the future.
This can be a great tool for Canadians that are looking to earn a passive income in their RRSP account. Since RRSP investing involves planning for retirement, investors can focus on the best Canadian stocks to buy and hold for 10 years or more.
Often, these are stocks with rising profits, increasing dividends and the potential capital appreciation over time.
Debt Sustainability
When evaluating a Canadian dividend stock, it’s important to analyze whether a company has too much debt on its balance sheet.
If the answer is yes, it might be best to avoid the stock or at least do more research. Many times, leading companies don’t use considerable debt to generate high returns for shareholders.
When determining whether a company’s debt is sustainable, investors should take a look at its interest payments and total amount of debt.
How well can the company’s debt be covered by its profits?
The goal of this type of analysis is to make sure that the company’s debt won’t become unsustainable during economic downturns.
Basically, investors want to assess whether a recession or any other factors could adversely impact its ability to pay dividends in the future.
This becomes even more important to assess if a company’s earnings are more cyclical or volatile.
If this is true, then it should have less debt.
Smart investors often try to pick Canadian dividend stocks that are conservatively financed and have generated consistent profits over long periods of time.
These types of companies usually avoid debt-related problems and use their assets to generate cash more creatively.
Company History, Competitive Advantage, and Future
The company’s history and current competitive advantage also play a major role in its future success. Investors should research how long the company has been in business, along with the history of key members in the organization, including the CEO and members of the board.
Next, assess how the company earns its profits. What is the company’s competitive advantage? Is it sustainable? And if so, what are the factors in the future that might impact its success?
Finally, take a look at the industry as a whole. Is there a massive disruption in consumer behaviour on the horizon? If the company is a market leader, is there a chance that its product(s) could become obsolete over the next 10 years?
Dividend income and growth become more important for long-term investors than the daily stock price fluctuations associated with day trading and short-term investing.
When deciding whether or not to buy Canadian dividend stocks, it’s important to take a long-term view. Research companies based on what they’ve done in the past and their outlook for the next 5-10 years.
How To Calculate Dividends Paid?
To calculate how much a company has paid out in dividends in the past year, access to the company’s income statement and beginning and ending balance sheets is necessary.
Dividends Paid Formula:
Dividends are typically calculated using the formula below:
Dividends Paid = Net profit – Net change in retained earnings
When Are Dividends Paid?
Dividends are often paid quarterly but can also be paid out in other installments or even as a one-time payment.
When a dividend is going to be paid, an amount is declared, along with a date when the amount will be paid out.
Usually, the dividend date and amount are determined once a company finalizes its income statement and the board of directors meets to review the company’s financials.
If the difference between net profit and net change in retained earnings is 0, then no dividends were issued during the period.
Net change in retained earnings is calculated by obtaining the difference between retained earnings figures in the ending and beginning balance sheets.
On the other hand, net profit is extracted from the income statement and is calculated by subtracting a company’s operating expenses from the gross income.
How Can Dividend Stocks Help Investors?
Dividend stocks are an important part of a diversified portfolio as they are typically more stable in the long run as opposed to non-dividend stocks and offer investors capital appreciation of stock price with the added advantage of a steady income source in the form of dividends.
Investors looking for lower-risk investments should be attracted to dividend stocks due to their lower volatility.
Some examples of growth companies that experienced great success after years of offering dividends include Fortis and Enbridge. Both companies offered more than two decades of dividend increases and experienced remarkable growth, which makes them excellent stocks to add to investors’ portfolios and certainly rank among the top dividend stocks to buy in Canada.
How To Calculate Dividend Payout Ratio
The dividend ratio indicates the ratio of earnings that is directed toward dividends.
A high payout ratio (55%-75%) indicates that the company is reinvesting a large percentage of its earnings toward dividends.
On the other hand, having a low dividend ratio is not necessarily a negative, as it may indicate a company that is interested in channeling its earnings toward growth.
Dividend Payout Ratio Formula:
The dividend ratio is calculated by dividing a company’s dividends by its earnings after tax, as per below:
Dividend Ratio= Dividends or Dividends per share Total Net Income or Earnings per share x 100%
How To Calculate Dividend Yield
The dividend yield is a noteworthy metric that allows investors to understand the percentage of return they will receive in the form of dividends.
Dividend yield is calculated by dividing the annual dividend per share and dividing it by a stock’s current price and is expressed in percentage, as per below:
Dividend Yield Formula:
Dividend Yield = (Annual Dividend per share/Stock‘s current price) x 100%
Dividend Yield Example:
For example, if a company is paying out an annual dividend of $2.32 and the stock’s price is $62.00, the dividend yield would be calculated as follows:
Dividend yield = ($2.32/$62.00) x 100%=3.74%
Calculating Total Return With Dividend Yield
Coupled with the change in a share’s price over time, the dividend yield represents a stock’s total return.
For example, if a stock increases 5% in value in a year and dividend yield is 2% over the same time period, then total return is (5%+2%=7%).
It is important to note that the dividend yield is not guaranteed and is subject to market fluctuations and company policy.
Canadian Dividend Aristocrats
Typically, a Dividend Aristocrat is a stock that pays consistent dividends and that has raised its dividend yield continuously or for at least 25 years. These stocks are usually top-performing and stable stocks that have maintained a strong performance over a long period of time.
Read on below to find out more about Canadian Dividend Aristocrats:
What Is A Dividend Aristocrat in Canada?
To be considered an aristocrat in Canada, a company must meet certain requirements:
- Minimum market cap of at least $300 million
- Must be listed on the Toronto Stock Exchange (TSX)
- Be a member of the S&P Canada Broad Market Index (BMI)
- Increasing dividends for at least a consecutive five years’ time period
These requirements vary slightly for dividend aristocrats in the US, which considers stocks based on the following:
- Must be listed on the S&P 500 list
- Increasing dividends every year for at least 25 years
- Large-cap stocks only (Minimum market cap of $13.1 billion)
Best Dividend Stocks In Canada By Sector
Best dividend stocks are those that blend dividend yield and dividend growth, as that will maximize investors’ returns.
Some investors choose to invest in stocks by sector, as certain sectors have performed well historically (ex: energy, utilities), while other investors have a portfolio of various stocks from different sectors.
The following list provides stocks that offer high dividends and excellent company growth by sector.
Check out the best dividend stocks in Canada by sector below:
- Energy – Enbridge (ENB.TO)
- Materials – Canadian Natural Resources (CNQ.TO)
- Industrials – Canadian National Railway Company (CNR)
- Utilities – Fortis (FTS.TO)
- Healthcare – Savaria (SIS)
- Financials – National Bank of Canada (NA.TO)
- Consumer Discretionary – Canadian Tire Corporation (CTC.A)
- Consumer Staples – Metro (MRU)
- Information Technology – Constellation Software (CSU)
- Communication Services – Telus (T.TO)
- Real Estate – Granite (GRT.UN)
What Is The Dividend Tax Rate In Canada?
It is important for investors to know about the dividend tax rate in Canada prior to investing in stocks.
A dividend tax credit represents an amount that is applied by a Canadian investor toward their tax liability on the grossed-up portion of dividends received from Canadian Corporations. The gross-up rate is the rate of additional money added to a payment to compensate for income taxes that the recipient, the investor, will owe on the payment.
Let’s use the following example to illustrate this concept: Say Investor Jimmy has an effective tax rate of 25% and receives $200 in eligible dividends during a tax year.
To calculate the federal dividend tax credit, Jimmy will need to “gross up” the total dividends he received by the percentage specified by the Canadian Revenue Agency (CRA).
This percentage is 38% for eligible dividends and 15% for non-eligible dividends. Total taxable income will end up being ($200 x 1.38) = $276. Tax on this income will be ($276 x 0.25) = $69. The federal dividend tax credit as a percentage of taxable dividends is 15% for eligible dividends and 9% for non-eligible dividends.
Therefore, Jimmy’s dividend tax credit on the federal level will be $41.40 ($276 x 0.15). The tax credit has therefore reduced Jimmy’s tax liability from $69 to $41.40. This, in a nutshell, is how the dividend tax rate works in Canada.
While the above example only used a federal tax credit, it is important to note that there are provincial tax credits, as well, which will only further investors’ tax liability on Canadian dividends.
The Canadian dividend credit does not apply to stocks that originate outside of Canada, including the US. Therefore, calculations involving gross-up and dividend tax credits do not apply to outside stocks for Canadian investors.
What Are The Highest Dividend Stocks In Canada?
While high-dividend stocks may pose a great investment opportunity for Canadian investors, there are some risks associated with chasing high-dividend stocks.
As the proverbial saying goes, all that glitters is not gold.
A company may have high dividends because its stock has suffered a significant drop in share price and it hasn’t cut its dividends yet. Once the share price has dropped, it is only a matter of time before the dividends get slashed as the company makes efforts to conserve cash, which may in turn drop share prices further.
It is also important to note that dividend stocks are vulnerable to rising interest rates. As rates rise, dividends become less attractive as an investment option.
Before investing in any high-dividend stock, investors need to examine the company’s financial info, including its free cash flow, dividend payout ratio, earnings, and revenue growth. If a company has healthy financials, then there should not a reason for concern about seeing high dividends.
Some high-yielding dividend stocks listed on the TSX include Vermillion Energy, Chemtrade Logistics Income Fund, and American Hotel Income Properties REIT.
These stocks all offer high dividend yields but high debt levels on some of these stocks should be a point of concern for investors.
Ultimately, it is up to the investor to decide whether to invest in these stocks and for how long.
Dividend ETFs Make Earning A Passive Income Easier
A dividend ETF is an ETF that is designed to invest in a basket of dividend-paying stocks. The goal of a dividend ETF is to maximize yields when investing in high-dividend-paying common stocks, and real estate investment trusts (REIT).
There are a few reasons why Canadians should invest in dividend ETFs. They are accessible (i.e. easy to buy and sell), they offer diversification and broad market exposure, and they often have low costs. By diversifying the ETFs in a portfolio, investors can minimize risk exposure.
Below are the top 5 dividend ETFs in Canada that we would recommend investors take a look at:
- Vanguard Canadian High Dividend Yield ETF (VDY)
- Invesco Canadian Dividend ETF (PDC)
- BMO Canadian Dividend ETF (ZDY)
- iShares S&P/TSX Canadian Dividend Aristocrats Index ETF
- iShares S&P/TSX 60 Index ETF
Final Thoughts
Dividend stocks are the same as any other investment: investing in them carries inherent risk.
As long as investors are willing to put in the time and effort in researching company financials and doing their homework, dividend stocks in Canada can be among the best stocks that they can buy in the long run.
Dividend stocks present fantastic opportunities amid market volatility. They offer an additional source of income through consistent dividends and, when coupled with increasing share price, can yield great returns.
It is important to note that just because a company has an excellent track record does not necessarily mean the company will continue to pay future dividends. Canadian dividend-paying stocks are also eligible for tax credits on dividend income, which is certainly a bonus.
Investors looking to minimize risk can look into dividend ETFs, which are typically offered at a lower cost and offer a diverse basket of ETFs from various sectors.
For investors who are willing to leave their money in stocks without pulling out, DRIPs (dividend reinvestment plans) are an excellent option.
The idea behind this concept is that the dividends that are made from stocks can be used to purchase further shares. This option allows investors to avoid paying commissions.