Second, you likely want stocks that are poised to rise in price. A stock with an 8% yield won’t do much good for your portfolio if it loses 10% of its value. (Just ask BCE shareholders!)
There’s no sure way to predict how a stock will perform, but we favour equities that are a good value to start with and show a positive earnings trajectory.
Finally, you want reassurance that management has been effective stewards of capital, such that this recent good performance isn’t subsidized by debt. That way it won’t be derailed by a nasty surprise. That’s the thinking behind the way we rank Canada’s dividend stocks, using purely quantitative factors.
Scoring the best dividend stocks in Canada
- The yield score (40% weighting) looks at the current dividend yield and the growth of the dividend over the past five years.
- The stability score (40% weighting) reveals the debt-to-equity ratio, return on equity, five-year earnings growth, and ratio of earnings per share to dividends.
- The valuation score (20% weighting) reflects the stock’s earnings yield (the inverse of price-to-earnings) and price-to-book value.
Learn more about the best dividends ranking methodology.
Ranking the Best Dividend Stocks in Canada
The results of our number-crunching, in the form of the Top 100 Dividend Stocks list below, may come as a surprise to some investors. You won’t find many of the usual suspects recommended by analysts and topping daily volume lists of numbers of shares traded. The only one of the Big Five banks represented is BMO, just making the cut at #92. There’s no Fortis, no Enbridge, no Restaurant Brands.
Think of those as the premium-priced name brands of the Toronto Stock Exchange. What our ranking highlights instead are many lesser-known names that may provide better value and growth prospects for your investment dollar. Of course, we won’t know until year-end how these picks perform for 2025, but our track record using the same methodology over the past 17 years gives us some confidence—check out how our 2024 Dividend All-Stars performed here.
“The scoring system we’re using rewards companies that exhibit rapid growth, low leverage and favourable valuation metrics, areas where banks may lag due to the nature of their business. Similar fundamentals are in play for telcos,” explains investing coach Aman Raina, founder of Sage Investors, who compiled our ranking for the third consecutive year. “Compare this with the resource companies, which have been more flush with cash thanks to higher commodity prices. They thus have more latitude to increase dividends aggressively.”
The average trailing yield for the Top 100 as of November 30 was 2.83%, slightly lower than that of the S&P/TSX Composite Dividend Index, representing all the dividend payers in the S&P/TSX Composite. Still, it provides investors seeking income some cash flow combined with capital appreciation and, in the case of a market downturn, a cash-flow cushion. And if they continue to hold these stocks for the long term, the payouts are likely to grow.
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