10 Best Canadian Dividend Stocks to Buy in 2024: A Beginner Guide

10 Best Canadian Dividend Stocks to Buy in 2024: A Beginner Guide

Your journey towards financial stability and growth might just have a promising path: dividend stocks. These powerhouse investments can potentially offer you a steady income stream, plus the opportunity of capital gains. But knowing how to select them is crucial for your investment portfolio's health and longevity.

What are Dividend Stocks and How to Select Them?

Dividend stocks represent shares in companies that payout regular dividends to their stock owners. Dividends can be paid out monthly or quarterly and the most interesting part is that they can be your ticket to a stable income. If you are only starting out into your investment journey; imagine receiving $100 each month tax-free from dividend stocks, this is becoming a very interesting passive income!

Clearly, dividend stocks are often present in investment portfolios. A strong dividend yield might significantly bolster your wealth over time. Consider it as a compound interest friend.

How to Get Tax-Free Returns from Dividend Stocks in Canada?

You won’t get taxed on dividends earned from stocks within a retirement account like a Registered Retirement Savings Plan (RRSP), as well as a savings plan such as a Tax-Free Savings Account (TFSA), First Home Savings Account (FHSA) and Registered Education Savings Plan (RESP).

Criteria for evaluating the best dividend stocks

You may wonder: “How to select the best dividend stocks”? The answer is fairly easy: your best bet should be on dividend stocks with a track record for growth and stability. Look closer, the details matter.

More specifically, we recommend looking at the current yield (e.g how much the stock will return in dividend), and the 5-Year Dividend Growth Rate.

What is a stock current yield ?

Current yield is a financial ratio that shows the annual income an investor can expect to receive from an investment, expressed as a percentage of its current market price.

Current Yield = (Annual Dividends per Share / Current Market Price per Share) * 100

Example: If a stock is trading at $50 per share and pays an annual dividend of $2 per share, the current yield would be (2 / 50) * 100 = 4%.

Current yield is a useful metric for income-focused investors. It provides a snapshot of the income generated by an investment relative to its current market value. However, it's important to note that current yield doesn't take into account potential changes in the stock's price or future dividend variations.

What is the 5-Year Dividend Growth Rate ?

The 5-year dividend growth rate is a measure that indicates the average annual rate at which a company's dividends have grown over the past five years.

best dividend stocks Canada 5yrs growth calculation

5-Year Dividend Growth Rate = (Dividend at the end of 5 years / Dividend at the beginning of 5 years)^(1/5) - 1

It's pretty simple: for example, if a company paid $1 per share in dividends five years ago and is now paying $1.20 per share, the 5-year dividend growth rate would be calculated as [(1.20 / 1)^(1/5)] - 1 or 3.7%

In short, the 5-year dividend growth rate provides insights into a company's historical ability to increase its dividend payouts. A consistent and positive growth rate may indicate financial stability and management's confidence in the company's future earnings. Investors often look for stocks with a history of reliable dividend growth, especially those seeking income that outpaces inflation. However, past performance does not guarantee future results, so other factors should also be considered in investment decisions.

10 Best Canadian Dividend Stocks to Buy in 2024

The top dividend stocks Canada has to offer should flaunt both growth in dividends and reliability. Here’s the top 10 list for the best dividend stocks in Canada:

Stock Ticker Symbol Current Yield 5-Year Dividend Growth Rate
National Bank of Canada TSE:NA 4.28% 13.85%
Canadian National Railway TSE:CNR 1.92% 11.81%
Royal Bank of Canada TSX:RY 4.06% 7.31%
Fortis TSX:FTS 4.4% 5.78%
Telus Corp TSX:T 6.41% 10.66%
Canadian Natural Resources TSX:CNQ 4.64% 30.29%
Emera TSX:EMA 5.86% 5.16%
Intact Financial TSX:IFC 2.21% 9.57%
Alimentation Couche-Tard TSX:ATD 0.94% 19.23%
Metro TSX:MRU 1.82% 10.96%

1. National Bank of Canada (TSE:NA)

What about banking on National Bank of Canada? It's shown a remarkable dividend growth trajectory.

  • Current Yield: 4.28%
  • 5-Year Dividend Growth Rate is: 13.85%

2. Canadian National Railway (TSE:CNR)

Efficiency is key, which is why Canadian National Railway could make the cut as a growth dividend stock.

  • Current Yield: 1.92%
  • 5-Year Dividend Growth Rate is: 11.81%

3. Royal Bank of Canada (TSX:RY)

Dive into Royal Bank of Canada stocks. They're often highlighted when talking about Canada dividend stocks.

  • Current Yield: 4.06%
  • 5-Year Dividend Growth Rate is: 7.31%

4. Fortis (TSX:FTS)

Looking for consistency? Fortis has been amplifying its dividends for decades. Reliable, it seems.

  • Current Yield: 4.4%
  • 5-Year Dividend Growth Rate is: 5.78%

5. Telus Corp (TSX:T)

Tech can offer dividends too. Telus Corp is frequently mentioned amongst the best dividend stocks.

  • Current Yield: 6.41%
  • 5-Year Dividend Growth Rate is: 10.66%

6. Canadian National Resources (TSX:CNQ)

The energy sector has its stars too. Canadian National Resources shines with its dividend performance.

  • Current Yield: 4.64%
  • 5-Year Dividend Growth Rate is: 30.29%

7. Emera (TSX: EMA)

Emera's infrastructure investments might translate to robust dividends for its investors. Watch it closely.

  • Current Yield: 5.86%
  • 5-Year Dividend Growth Rate is: 5.16%

8. Intact Financial (TSX:IFC)

Stability matters, and Intact Financial has been showing it. Its dividends are worth your attention.

  • Current Yield: 2.21%
  • 5-Year Dividend Growth Rate is: 9.57%

9. Alimentation Couche-Tard (TSX:ATD)

Retail resilience can mean dividends. Alimentation Couche-Tard's growth suggests it's a stock to consider.

  • Current Yield: 0.94%
  • 5-Year Dividend Growth Rate is: 19.23%

10. Metro (TSX:MRU)

Metro's consistent performance makes it a staple in discussions about the best dividend stock Canada offers.

  • Current Yield: 1.82%
  • 5-Year Dividend Growth Rate is: 10.96%

The Landscape of Canada's Dividend Stocks in 2024

In 2024, the landscape of Canada's dividend stocks is shaped by dynamic economic factors. Stay informed on the ever-changing economic winds that influence these stocks to make informed investment decisions. Sectors such as banking, energy, and utilities consistently stand out for their strong dividend performance, making them prime candidates for investors seeking the best dividend stocks in Canada.

Assessing Risks and Opportunities

Navigating the risks and opportunities in the dividend market involves finding the right balance between yield and stock stability. Aim for the sweet spot that combines solid growth with stability when selecting dividend stocks. Understanding the tax implications is crucial, as taxes can impact the overall returns from dividends. Diversification strategies, spreading investments across sectors, act as a safeguard against risks, ensuring a resilient portfolio.

Investment Strategies for Maximizing Dividend Returns

To maximize dividend returns, adopt investment strategies that focus on building a diversified portfolio with a careful balance of yield and growth. 

Reinvesting dividends through Dividend Reinvestment Plans (DRIPs) and other reinvestment options can accelerate portfolio growth. For instance, many popular broker platforms like WealthSimple or Questrade have features to auto-reinvest your dividends, which is very neat.

While market timing is challenging, identifying entry points at a dividend stock's inflection point holds the potential for rewarding returns. Stay vigilant and strategically position your investments in the ever-evolving landscape of Canadian dividend stocks.

FAQs

How do dividend stocks work?

Dividend stocks pay you a share of a company's earnings. Dividends can be paid monthly or quarterly. It's a reward for your investment also known as passive income.

How to buy dividend stocks in Canada?

Access the market via exchanges or funds. Brokers and advisors can help you as well. The easiest place to buy dividend stocks in Canada is on Wealthsimple.

Get $25 when you fund any Wealthsimple account with my referral code: OLY59W - Plus we’ll both get our reward boosted to $250 if you become a Premium client within 30 days and $1,000 if you reach Generation.

Sign up to Wealthsimple →

What Criteria Determine the Best Dividend Stocks in Canada?

Consistent payouts, financial health, and growth prospects are key indicators. Also look into the Current Yield and the 5-Year Dividend Growth Rate.

How Can Beginners Get Started with Dividend Stock Investments in Canada?

Start by investing $100 into high 5-Year Dividend Growth Rate companies like Fortis (TSX:FTS), Telus Corp (TSX:T), Canadian National Resources (TSX:CNQ) or Royal Bank of Canada (TSX:RY). It’s never too late to invest your first hard earned $100.

With continuous research, then move to small, diversified investments. Steady wins the race.

What Are the Financial Benefits of Investing in Canadian Dividend Stocks?

They offer potential for regular income and capital appreciation. Two birds, one stone, and also known as passive income.

How Often Are Dividend Payouts Made by Top Canadian Stocks?

Typically quarterly. But some might surprise you with monthly dividends.

Which Canadian stocks pay monthly dividends?

Research to find those rare gems that offer dividends every month. Hint; they are mostly REITs companies.

How to make $100 a month in dividends?

Invest in high-yield stocks or funds. Accumulate enough shares and auto-reinvest dividends through platforms like WealthSimple

Get $25 when you fund any Wealthsimple account with my referral code: OLY59W - Plus we’ll both get our reward boosted to $250 if you become a Premium client within 30 days and $1,000 if you reach Generation.

Sign up to Wealthsimple →

For example, if we look at this REIT dividend stock, NorthWest Healthcare Properties Real Estate Investment Trust (TSX:NWH-UN), the stock trades at the time of writing at $4.9 and has a monthly dividend payment of $0.03 (and an interesting 7.48% yield). 

You would need to invest approximately $16,326.53 in the stock at $4.9 price to receive $100 per month in dividend returns, assuming the stock's dividend yield remains constant.

Mika L.

Hello! I’m Mika, founder of Savings Grove – I love spending smartly and cheaply, saving, and making money online! On this website, discover 50+ curated articles how to save and make more on various useful topics; so stay tuned!

The mantra is simple: Make more money, spend less, and save as much as you can.

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