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Dividend Stocks in Canada: Top Evaluation Methods

Written by Tim-bot
Reviewed by Friedrich Odermann Fact-checked by Ed Weinberg
Updated 11/17/2023 20 min read

Dividend stocks in Canada are shares in companies that pay out a portion of their earnings to shareholders, typically on a regular basis. These stocks are a popular investment strategy for those looking to generate consistent income alongside potential stock price appreciation. In the Canadian market, they offer a unique blend of stability and growth, often backed by robust industries like banking, energy, and telecommunications.

Now, I’m a trader, not an investor, but I’ve taught thousands of people about the nuances of the market. And let me tell you, understanding dividend stocks can be crucial for your financial strategy. Whether you’re trading or investing, knowledge is your best asset.

You should read this article because it offers a comprehensive guide to dividend stocks in Canada, covering everything from evaluation methods to top picks for 2024.

I’ll answer the following questions:

  • What are dividend stocks?
  • How does dividend investing work?
  • Why should you consider investing in dividend stocks?
  • How do you evaluate Canadian dividend stocks?
  • What is dividend yield and why is it important?
  • What is the payout ratio and what does it indicate?
  • How do you avoid the dividend yield trap?
  • How do you invest in dividend stocks in Canada?

Still with me? Good. Now let’s get to the content!

Table of Contents

What Are Dividend Stocks?

Dividend stocks are shares in a company that returns a portion of its earnings back to shareholders. This return is usually in the form of cash payments, commonly referred to as dividends. In the stock market, these are the go-to for investors looking for both income and investment growth.

Now, I’ve been trading for years, focusing mainly on patterns and quick gains. But even in my fast-paced world, I recognize the value of understanding different market strategies. Dividend stocks can offer a more predictable, albeit slower, path to financial success.

Entities like banks, utility companies, and firms in the energy sector are often the stars in the dividend-paying lineup. They generate consistent revenues and profits, making them attractive to investors who prioritize steady cash flow and lower risk.

How Does Dividend Investing Work?

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When you invest in dividend stocks, you’re essentially buying shares in a company with the expectation of receiving a portion of the company’s earnings. These earnings are distributed as dividends, usually on a quarterly basis. The rate at which these payments are made is known as the dividend yield.

I’ve always said, base your decisions on your risk tolerance and comfort level. Dividend investing is generally considered a lower-risk strategy compared to, say, day trading penny stocks. It’s a different ball game, but the goal is the same: to increase your wealth over time.

Companies usually have a payout ratio, which is the percentage of earnings paid out as dividends. This ratio can give you an idea of the company’s financial health and its ability to continue paying dividends in the future.

While dividend investing is a long-term game, it’s worth noting that there are other strategies like trading penny stocks that focus on quick gains. The risk profiles are different, but understanding both can give you a more rounded view of the market. If you’re curious about how this contrasts with dividend investing, you should read up on different types of stocks.

Reasons To Consider Investing in Dividend Stocks

Investing in dividend stocks can be a smart move for several reasons. First, they provide a consistent income stream. Second, they often belong to established, stable companies, which can add a layer of security to your portfolio.

I’ve been transparent about my trading wins and losses. And while I don’t invest in dividend stocks, I know that a diversified portfolio can be a lifesaver. Dividend stocks can offer that diversification, balancing out the risks associated with more volatile trading strategies.

Investing in dividend stocks can offer a consistent income stream, but did you know that even some penny stocks pay dividends? While rare, they do exist and can offer a unique blend of income and potential for quick gains. If this piques your interest, check out this guide on penny stocks that pay dividends.

Dividend Investing Basics

The basics of dividend investing revolve around looking for companies with a history of consistent dividend payments and a solid business model. These companies often operate in sectors that have a moat against economic downturns, like utilities or essential services.

Even though I’m right about 70% of the time in my trades, I know the importance of having a fallback. Dividend stocks can be that fallback. They’re generally less susceptible to market volatility, making them a good option for those looking to mitigate risks.

Investors often use financial metrics like dividend yield and payout ratio to evaluate potential dividend stocks. These metrics can provide valuable insights into the company’s performance and its ability to maintain or increase dividend payments.

How To Evaluate Canadian Dividend Stocks

Evaluating dividend stocks involves a deep dive into a company’s financials and performance metrics. You’re not just looking at stock prices; you’re analyzing a range of factors to gauge the company’s health and its ability to provide consistent returns.

I’ve taught countless traders how to evaluate stocks based on patterns and market trends. While dividend stocks require a different approach, the underlying principle is the same: do your homework. Knowledge is power, whether you’re day trading or investing for the long term.

Evaluating dividend stocks is a meticulous process that involves looking at various financial metrics. But don’t let the allure of high-growth stocks distract you from this strategy. Growth stocks can be volatile and may not offer the income stability that dividend stocks do. For a deeper understanding of the risks involved in chasing growth stocks, read this article on growth stock blues.

Dividend Yield

Dividend yield is calculated by dividing the annual dividend payment by the stock’s current price. It’s a key metric that gives you an idea of the income you can expect relative to your investment. A higher yield is generally more attractive, but it’s not the only factor to consider.

In my trading courses, I emphasize the importance of not putting all your eggs in one basket. The same applies here. A high dividend yield is great, but you should also consider other financial metrics and the overall health of the company.

Payout Ratio

The payout ratio is another crucial metric. It’s the percentage of a company’s earnings that are paid out as dividends. A lower ratio often indicates that the company has room to grow its dividends in the future. However, an extremely low ratio could also mean the company is not earning enough to sustain its dividend payments.

I’ve always been about cutting losses quickly and managing risk. In the world of dividend stocks, a company with a high payout ratio could be a red flag. It might indicate that the company is distributing too much of its earnings, leaving little room for growth or for weathering financial downturns.

Earnings Per Share

Earnings per share (EPS) is a financial metric that divides a company’s profit by the number of outstanding shares. A higher EPS often indicates a more profitable company, which in turn suggests a more reliable dividend payment.

In my years of trading, I’ve seen companies with high EPS often attract more investors. While I focus on quick trades and patterns, I can’t ignore the fact that EPS is a strong indicator of a company’s financial health, which is crucial for long-term investments like dividend stocks.

Price to Earnings

Price to Earnings (P/E) ratio is another metric to consider. It’s calculated by dividing the current stock price by its earnings per share. A lower P/E ratio could indicate that the stock is undervalued, while a higher ratio might suggest overvaluation.

Just like in trading, timing is everything. Buying an undervalued stock with good fundamentals can be a smart move. But remember, a low P/E ratio isn’t the be-all and end-all. Always look at the bigger picture, including other financial metrics and market conditions.

Avoiding the Dividend Yield Trap

A high dividend yield can be enticing, but it’s not always a good sign. Sometimes, a high yield is a result of a falling stock price, which could indicate that the company is in trouble. This is known as a dividend yield trap.

In my trading world, we call this a “pump and dump,” where something looks good on the surface but is rotten underneath. Always do your due diligence. Look at the company’s earnings, payout ratio, and other financials to ensure you’re not falling into a trap.

Top Dividend Stocks in Canada in 2024

My top Canadian dividend stock picks are:

If you’re looking to invest in Canadian dividend stocks, there are several strong contenders to consider. These companies have a history of reliable dividend payments and are backed by robust industries.

I’ve always said, develop your own techniques. But sometimes, a list of tried-and-true options can serve as a good starting point. So, here are some top picks for 2024, based on their performance, dividend yield, and overall stability.

Before you send in your orders, take note: I have NO plans to trade these stocks unless they fit my preferred setups. This is only a watchlist.

The best traders watch more than they trade. That’s what I’m trying to model here. Pay attention to the work that goes in, not the picks that come out.

Sign up for my NO-COST weekly watchlist to get my latest picks!

Fortis (TSX: FTS)

My first Canadian dividend stock pick is Fortis (TSX: FTS).

Fortis is a leader in the North American utility sector. With a dividend yield around 4.3%, it’s a stock worth watching. The company has increased its dividends for 47 consecutive years, making it a reliable pick for dividend investors.

Fortis has a diversified asset base, including electric and gas utilities, which provides a stable cash flow.

In trading, I focus on patterns and trends. Fortis shows a pattern of consistent dividend growth, making it a solid choice for those looking for reliable income. Its operations span across Canada, the United States, and even parts of the Caribbean, offering geographic diversification.


My second Canadian dividend stock pick is BCE Inc. (TSX: BCE).

BCE Inc. is a telecommunications giant in Canada, offering a dividend yield of approximately 7.75%. The company has been investing heavily in its network infrastructure, which could lead to long-term growth and sustained dividend payments.

Just like I teach my students to look for companies with strong fundamentals in trading, BCE’s diverse range of services and strong market presence make it a good pick for dividend investors. Its operations are not just limited to one segment, providing a cushion against market volatility.

Enbridge (TSX: ENB)

My third Canadian dividend stock pick is Enbridge (TSX: ENB).

Enbridge operates in the energy sector, specifically in oil and gas pipelines. It offers a high dividend yield of around 8.35%. The company has been consistently growing its dividends for the past 28 years, making it a strong contender for your portfolio.

In my experience, companies that dominate their sectors often make for good picks, whether you’re trading or investing. Enbridge is a key player in the energy sector, with operations spanning across North America, providing both stability and growth potential.

Toronto-Dominion Bank (NYSE: TD)

My fourth Canadian dividend stock pick is Toronto-Dominion Bank (NYSE: TD).

Toronto-Dominion Bank is one of the largest banks in Canada and offers a dividend yield of around 5.02%. The bank has a strong presence not just in Canada but also in the United States, providing it with excellent growth opportunities.

In the trading world, we often look for companies that have a competitive edge. TD Bank’s expansive network and diverse range of services give it that edge, making it a strong contender for those looking to invest in dividend-paying stocks.

TELUS Corporation (NYSE: TU)

My fifth Canadian dividend stock pick is TELUS Corporation (NYSE: TU).

TELUS is one of the big three telecom companies in Canada. It offers a forward dividend yield of 6.64% and has been making strategic acquisitions to diversify its revenue streams, making it a stock to keep an eye on.

In trading, diversification is key to managing risk. TELUS offers that diversification by operating in various segments of the telecommunications sector, from internet to healthcare technologies, making it a well-rounded choice for dividend investors.

Royal Bank of Canada (NYSE: RY)

My sixth Canadian dividend stock pick is Royal Bank of Canada (NYSE: RY).

Royal Bank of Canada is the largest bank in the country and offers a dividend yield of around 4.91%. The bank has a diversified business model that includes retail banking, wealth management, and investment banking.

Just like in trading, where I teach people to look for patterns and trends, RBC shows a pattern of consistent growth and strong financials. Its diverse range of services makes it a robust choice for those looking to add a financial sector stock to their dividend portfolio.

Thomson Reuters Corporation (NYSE: TRI)

My seventh Canadian dividend stock pick is Thomson Reuters Corporation (NYSE: TRI).

Thomson Reuters specializes in real-time news coverage and offers a dividend yield of 1.64%. The company has been stretching its dividend growth streak to 30 years, making it a reliable pick for long-term investors.

In my trading courses, I emphasize the importance of doing your homework. Thomson Reuters is a company that provides the data and information many industries rely on, making it a stable choice for those looking to invest in dividend stocks.

Canadian National Railway Company (NYSE: CNI)

My eighth Canadian dividend stock pick is Canadian National Railway Company (NYSE: CNI).

Canadian National Railway operates in the transportation sector and offers a dividend yield of 2.16%. The company has been consistently growing its dividends for the past 23 years, making it a solid pick for dividend investors.

Small gains add up in trading. The same can be said for dividend investing. Canadian National Railway’s consistent performance and dividend payments make it a solid choice for those looking to accumulate wealth over time.

How To Invest in Dividend Stocks

Investing in dividend stocks involves more than just picking a company with a high yield. You need to do your due diligence, looking at a range of financial metrics and market conditions to make an informed decision.

I’ve been trading for years, and if there’s one thing I’ve learned, it’s that preparation is key. Whether you’re day trading or investing in dividend stocks, you need to do your homework. Look at the company’s earnings, dividend history, and other financial metrics to gauge its performance and potential for growth.

How To Buy Dividend Stocks in Canada

To buy dividend stocks in Canada, you’ll need to open a brokerage account. Once that’s set up, you can use the platform to search for dividend-paying companies, analyze their financials, and make your purchase.

In the world of trading, quick decisions often lead to quick gains. But when it comes to dividend investing, you need to take your time. Use the brokerage’s research tools to analyze potential picks and consult with financial analysts if needed. Remember, this is a long-term strategy aimed at consistent income and growth.

Key Takeaways

Dividend stocks offer a unique investment opportunity, providing both income and potential for capital appreciation. They’re generally considered a lower-risk option, making them a good choice for those looking to diversify their portfolio.

I may be a trader, but I know the value of understanding all aspects of the market. Whether you’re a trader or an investor, knowledge is your most valuable asset. Dividend stocks can offer a stable, income-generating option for those looking to diversify their financial strategies.

Trading isn’t rocket science. It’s a skill you build and work on like any other. Trading has changed my life, and I think this way of life should be open to more people…

I’ve built my Trading Challenge to pass on the things I had to learn for myself. It’s the kind of community that I wish I had when I was starting out.

We don’t accept everyone. If you’re up for the challenge — I want to hear from you.

Apply to the Trading Challenge here.

Trading is a battlefield. The more knowledge you have, the better prepared you’ll be.

What Canadian dividend stocks are on your watchlist? Let me know in the comments — I love hearing from my readers!


How Do Dividends Work?

Dividends are payments made by a company to its shareholders, usually from its earnings. These payments are typically made on a regular basis, such as quarterly, and are a way for the company to distribute a portion of its profits back to its investors.

Are There Tax Benefits for Dividend Stock Investing in Canada?

In Canada, dividends from Canadian companies are often eligible for a tax credit, making them more tax-efficient compared to other forms of income. This can be a significant advantage for those looking to maximize their returns.

What’s the Best Dividend Stock in Canada for You?

The best dividend stock for you will depend on your financial goals, risk tolerance, and investment strategy. It’s important to do your own research and possibly consult with a financial advisor to determine which stock is the best fit for your portfolio.

How Do Capital Markets Influence Dividend Stocks in Canada?

In the Canadian capital markets, brokers and institutions analyze assets and securities to determine the dividend growth rate and yields. Equity in companies like TC Energy and Alimentation Couche-Tard is evaluated for payouts, providing a clear picture of potential investment returns amid inflation.

What Are the Top Dividend Stocks Across Canada’s Regions?

In regions like Quebec, Alberta, Ontario, and British Columbia, investors often look to companies such as CNQ.TO and ENB.TO for reliable dividend payouts. These provinces, along with cities like Vancouver, offer a variety of high-yielding assets, including those in natural gas and other energy sectors.

What Financial Services Aid in Dividend Stock Evaluation?

Wealth management services and insurance companies offer products and advice to help evaluate dividend stocks. They consider savings rates and the potential impact of interest rates on investments, ensuring clients make informed decisions.

How Are Recession and Economy Indicators Used to Assess Dividend Stocks?

Economic factors like recession risk and the overall state of the economy are crucial in assessing dividend stocks. Investors look at regional economic stability, producers’ ability to maintain distribution amid debt, and expansion efforts to determine the resilience of dividends.

How Do Ratings and Fees Affect Investment in Dividend Stocks?

Ratings provide a comparative analysis of a company’s financial health against its peers, affecting investment decisions. Fees associated with purchasing securities like ENB.TO or funds specializing in regions like Alberta or sectors like natural gas also influence the overall cost and quality of investment portfolios.

What Impact Does International Exposure Have on Canadian Railway Stocks Like CNR.TO?

Canadian railways companies like CNR.TO benefit from exposure to markets in Europe and Asia, enhancing their growth prospects beyond domestic borders. This international reach allows them to diversify their operations and customer base, potentially leading to an increase in the amount of goods transported and bolstering industry resilience.

How Do Real Estate Trends in Asia and Europe Influence Canadian Stocks Like TD.TO?

As a provider of financial services, TD.TO monitors real estate trends in Europe and Asia, which can influence investment strategies and offerings to customers. The global real estate market’s health often reflects in the valuation of properties and can affect the performance of stocks in related groups and industries.

Can Exposure to International Markets Benefit Canadian Energy Stocks Like TRP?

Yes, TRP and other Canadian energy companies with a presence in Asia and Europe can leverage this exposure to diversify their risk and tap into growing demand. This geographical diversification can lead to an increase in the valuation of their assets and potentially enhance the overall amount of revenues from international sales.

How Do Canadian Retail Stores Utilize Video Content to Engage with International Customers?

Canadian retail stores are increasingly using video content as an addition to their marketing strategies to engage customers across different regions, including Asia and Europe. By showcasing their products, properties, and the uniqueness of their offerings, these stores can build a stronger brand name and attract a diverse group of customers.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”