Beginners Guide to Canadian Dividend Stocks

Beginners guide to Canadian dividend stocks

If you want truly passive income, Canadian dividend stocks are the easiest place to start.

Buying dividend stocks lets you invest in relatively healthy companies, make money each quarter or each month, and not have to check your account every day.

So where do you start looking for Canadian dividend stocks? How do you know which companies are relatively safe?

Let’s dive in.

What is a dividend?

Some companies make cash payments to investors every quarter or every month. These cash payments are called dividends. Not all companies pay dividends, but most mature, profitable companies do.

To collect dividends, all you have to do is buy stock in a company that pays a dividend and hold it through the record dates (when companies record who their shareholders are). You don’t have to do anything special. It’s cash automatically deposited into your investment account. 

It’s truly passive income.

You get a certain dollar amount per share. The company decides how much the dividend per share is. Companies may elect to raise their dividend each year. Sometimes companies will decrease their dividend, but they try not to do that. Decreasing their dividend payout can be a sign to investors of financial trouble.

What is dividend yield? 

Many investors compare dividend yields when considering which companies to invest in.

Dividend yield is calculated by dividing the price per share by the annual dividend amount.

Dividend yield = Price per share / Annual dividend amount.

So, if the stock price is $40 and the company decides to pay a dividend of $0.04 per share every year, their dividend yield is 1%.

That annual dividend is usually paid out in quarterly installments, although some companies will pay monthly.

If you hold 100 shares of this company, your annual dividend payment is $4. So your quarterly payment would be $1.

100 shares x $0.04 annual dividend per share = $4 total payout (spread out over 4 quarters, so $1 each quarter)

Canadian Dividend Stocks

So which dividend stocks should you buy?

Ultimately that’s up to you. We are not recommending any stocks here. We just want to show you some of the decision making criteria you could use to make your decision.

First of all, how long has the company been increasing their dividend?

Let’s look at Canadian “dividend aristocrats” in particular. In Canada, a company is considered a dividend aristocrat if:

  • they increased their dividend for at least five years straight
    • They can have the same dividend (no increase) for a maximum of two years within the five-year period.
  • Market Capitalization of at least $300 Million CAD

The Canadian banks have been considered dividend aristocrats for decades but there are some new additions as well. 

CompanyTickerYearsDiv Yield
Canadian UtilitiesCU.TO504.52%
Fortis Inc.FTS.TO483.42%
Toromount IndustriesTIH.TO321.38%
Canadian Western BankCWB303.70%
Atco Ltd.ACO.X.TO284.03%
Thomson ReutersTRI.TO281.66%
Empire Company Ltd.EMP.A.TO271.32%
Imperial OilIMO.TO272.12%
Metro Inc.MRU.TO271.51%
Canadian National railwayCNR.TO261.87%
Enbridge Inc.ENB.TO265.86%
Saputo Inc.SAP.TO222.40%
TC Energy CorpTRP.TO214.88%
Canadian National Resources LTDCNQ.TO213.71%
CCL Industries IncCCL.B.TO201.68%
Transcontinental Inc.TCL.A.TO205.14%
Finning International IncFTT.TO202.44%
Ritchie Bros AuctioneersRBA.TO191.74%
TELUS CorpT.TO183.80%
Cogeco Communications Inc.CCA.TO182.64%
Cogeco IncCGO173.23%

What do I do with this information?

Again, these are not recommendations. 

This is a place to start your search for the companies you want to invest in.

Take a look at these companies for yourself and see if any of them fit your investing criteria.

If you buy a dividend stock in your TFSA, the returns are tax free! And you can sell covered calls on those stocks too.

What is a covered call? We introduce and explain it in our Options for Beginners series.

That’s all for now.

Happy trading,

Your fellow Stock Hackers,

🍒Cherry & Erwin
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