The Best Canadian Dividend Stocks

As a dividend growth investor, I typically hold mostly U.S.-based dividend stocks. There are several reasons behind that, which I outlined in this article on the best international dividend stocks. Another reason why I hold U.S.-based multinationals has been outlined in this article.

Canadian dividend stocks seem to be having characteristics that make them similar to their U.S. counterparts. First, most Canadian stocks pay a regular distribution every quarter. Second, most Canadian blue chips pay a stable or rising dividend. This is unlike most European companies for example, which typically target a payout ratio based off earnings. Last, U.S. investors get 15% of their Canadian dividend income withheld at the source. At tax time, however, US investors get an offsetting credit against this tax withholding in taxable accounts. So the net effect is zero for most high-income investors.

In order to find the best Canadian dividend stocks, I obtained a list of Canadian Dividend Achievers. These are Canadian companies, that have increased dividends for the past five or more consecutive years.

I then screened the list based off my entry criteria:

1. Dividend Yield of at least 2.50%
2. P/E Ratio below 20
3. Dividend Payout Ratio less than 60%

Only one of these stocks is traded on the NYSE, and the rest are traded on the OTC market. The symbols used above also include the ones for the Toronto Stock Exchange.

On a side note, I was surprised that none of the Canadian banks appeared on this screen. Despite the fact that the Canadian banks such as Bank of Montreal (NYSE:BMO), Toronto-Dominion Bank (NYSE:TD), Royal Bank of Canada (NYSE:RY), Bank of Nova Scotia (NYSE:BNS) and Canadian Imperial Bank of Commerce (NYSE:CM) were not affected by the financial crisis of 2007 – 2009, they did freeze dividends for almost 2 years. Chances are however, that within a few short years, these companies will be able to build another streak of consecutive dividend increases.

Full disclosure: Long TD. For more information visit DividendGrowthInvestor.com