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Should You Invest in Canadian Dividend Stocks?

Should You Invest in Canadian Dividend Stocks?

One of the ways that you can boost your return over time is to invest in dividend stocks. Canadian dividend stocks offer you a chance to earn a little extra money from your investments, and you might even get a good value that results in capital appreciation.

What are Canadian Dividend Stocks?

Dividend stocks are those that pay out a portion of profits regularly. When a company has profits, there is the option to pay some of those out to shareholders. This is an extra payment that comes on top of any capital appreciation that the stock might have.

In many cases, the payout is made on a quarterly basis. Canadian dividend stocks offer their payouts based on the number of shares you hold. So, if a company says that it will pay out $0.25 per share each quarter, that amount is multiplied by the number of shares you have. If you have 200 shares of the company’s stock you will receive $50 every quarter. This is money that you can use as income, or that you can reinvest.

Many Canadian companies will allow you to automatically reinvest your dividends. This helps you boost the number of shares you have in your portfolio, without the need for you to actively purchase more shares. If the company’s shares are priced at $75 per share, and you receive a payout of $50, you will receive 2/3 of a share to add to your portfolio.

One of the advantages to this system is that your portfolio grows with what amounts to “free” money. You have more shares, so the next time the company pays dividends, your payout is bigger, since it is based on your new, higher number of shares. If you continue to automatically reinvest your dividends, you could see your portfolio grow faster.

It’s important to understand that a dividend isn’t guaranteed. Companies can cut their dividends (or get rid of them altogether) so you aren’t sure that you will always receive the dividend. But choosing your Canadian dividend stocks carefully can improve the chances that you will end up receiving payouts for years to come.

Canadian Dividend Aristocrats

If you want to increase the chances that the dividend stocks you choose are likely to pay out consistently, you might consider the dividend aristocrats. To make this list, a Canadian company must have increased its dividend payout for five consecutive years to make the cut.

With these Canadian dividend stocks, you can see that a company is likely to continue making dividend payout increases. Another thing to keep in mind is that there is a good chance that these are companies that have solid growth prospects, and have solid balance sheets. You can’t consistently pay out a portion of your profits to shareholders in the form of dividends if your company doesn’t have solid fundamentals.

Some companies will boost dividends in an attempt to attract investors, but sometimes these efforts disguise the troubles that might be afflicting a company. While it might be exciting for a short time to get that high yield, the reality is that it might not be sustainable, and a cut could come. Plus, you might end up in a position in which a faltering company’s stock value plunges, leading to capital losses.

When used properly in a portfolio, Canadian dividend stocks can provide you with a little extra income, and better returns. On top of that, the right companies can also provide you with capital appreciation. Dividends enjoy favourable treatment as well, so they are more tax efficient than other investments.

Keep all of this in mind, and you can create a solid portfolio that includes Canadian dividend stocks.


  1. Bernie

    The Canadian Dividend All-Star List, comprised of Canadian companies that have increased their dividend for 5 or more calendar years in a row, can be found here:

    The list is updated monthly.

  2. Asset-Grinder

    This Canadian dividend aristocrat list updates daily. Also good for global lists.

    Great article!

    Good Day and Grind On!

  3. Mark

    Another option is the etf cdz.

  4. bericm

    While I have not researched the Canadian Aristocrats – research for me requires a model portfolio and a 5-yr time frame – I have applied the Dow Dogs methodology to the TSX60 with fantastic results. I also *have* to add that a DYI portfolio of Canadian dividend paying stocks, managed with a little bit of due diligence and purpose stands a darn good chance of beating the majority of mutual funds.

    A great post, it gladdens me to see other proponents of “taking charge” in the face of the doom and gloom crowd telling us that “studies say” that “the individual investor is a failure”!!

    Keep up the good work!

  5. Len Petry

    Five years of dividend growth data is not enough. Almost every company that survived to 2008 Bear market has since raised dividends at uncharacteristically-high rates. To assume that this rate of dividend growth will continue unabated is not wise.

    I want to see how the company treated dividends DURING the 2008 Bear. To get this data, go to Yahoo Finance, historical prices, and click on “dividends only”.

    But there is more. To assess how dividends will grow in future, and how safe that dividend is, you need to see a lot of data: EPS growth, sales growth , FCF (free cash flow) per share growth, etc etc. This data is often difficult (at times impossible) to get for a Canadian stock, unless it is trading on an American exchange, in which case there are sites that provide this information easily for you.

    Then there is the difficulty of constructing a portfolio of solid stocks in each of the stock-market sectors. The strongest stocks in the TSX are mostly financial stocks (i.e. banks) and energy stocks (i.e. oil stocks), so constructing a balanced portfolio of purely Canadian stocks is difficult.

    What to do? Include foreign stocks in your dividend portfolio, and stick to bank and oil stocks for the Canadian portion. Preferably restrict yourself to those Canadian stocks that trade on the NYSE or Nasdaq, so that you can get the information you need to make a smart choice relatively easily.

    • Bernie

      Len Petry,
      It’s far easier and more reliable than Yahoo Finance to start your dividend growth stock search with the latest Canadian Dividend All-Star List:
      The monthly updated list List is comprised of Canadian companies that have increased their dividend for 5 or more calendar years in a row. The December list shows 46 companies that have raised annually since at least 2008

  6. Heather

    This works. I have a list of five Canadian stocks that pay dividends and automatically reinvest any earnings and have purchased initial shares in two of them. Plan on purchasing the other three as I get funds to do so. They all will allow you to purchase more shares without further fees so plan on doing that too. My accountant likes it when he does my income taxes too, says it’s a good way to invest that’s tax friendly.

  7. Bernie

    My DGI stock portfolio, currently 2/3 Cdn & 1/3 U.S. has a CAGR of 10.38% since initiation in mid 2008, 14.55% post recession. I’ve considered the BTSX but have done quite well without. My return in 2016 was 20.9% without adding in money. Have been retired 5 years but still accumulating for one more year via reinvesting dividends.

  8. Serge

    Will you consider basket of dividend stocks rather than famous dividend ETFs for the only dividend appreciation, I am not saying about capital gains and overal growth but again – only dividend growth? Thank you!

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