Canada’s Best Dividend Growth Stocks for 2020

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I originally started looking at the best Canadian dividend growth stocks back in 2013.  As one of the most popular annual articles on the site, I’m proud to enlarge the list this year to include my top 25 Canadian dividend stocks for 2020.

For a quick read, view this list – complete data per stock of the best dividend stocks for 2020.

I have included all the top 25 Canadian dividend stocks that have the longest track record of increasing their dividends. The longest streak as of January 2020 belongs to Canadian Utilities (CU.TO), while the 25th position is occupied by Intact Financial (IFC.TO).  The list includes all of Canada’s Dividend All Stars, as well as all of the Canadian Dividend Aristocrats.

If you’ve been following Million Dollar Journey for a while, you’ll know that I’m a fan of dividend growth investing because it provides a dependable stream of increasing tax-efficient income. For those of you interested in this strategy as well, you can see an example through my leveraged dividend portfolio.  In fact, growing a passive dividend income stream is my strategy for achieving financial freedom.

Two questions that I often get asked are: “What are my favorite dividend all star stocks?” and “What do I think are the absolute best dividend stocks for Canadians?”.  As a dividend growth investor, I like to invest in dividend paying companies that have a history of increasing their dividends, but the stocks also have to provide diversification within my portfolio. Unfortunately, the TSX has a limited number of stocks with a long dividend growth history.  To see a list of my Top 10 dividend positions, keep reading below. These selections include companies showing a strong mix of revenue growth, earnings growth, and dividend growth.  Thus making them excellent candidates to not only keep paying a dividend, but to grow that juicy payout each year.

The New 2020 Picks for Best Canadian Dividend Stocks

Doing some background research for 2020, I dug up 25 Canadian dividend growth stocks with the longest histories of annual dividend increases. Usually, there is little change in the list because companies who have a mandate to pay increasing dividends tend to follow that pattern.

Sometimes, dividend companies get removed from the list because of three possible reasons:

1) A pause in dividend increases
2) A dividend cut/reduction
3) The company gets acquired

This time around, no companies were deleted, and I added three more!

Cogeco Inc. (CGO.TO)
Stella-Jones Inc (SJ.TO)
Intact Financial Corp (IFC.TO)

Top Dividend Growth Stocks on the TSX

Please note: this Canadian Dividend Stocks list was created largely by gathering information from Dividend Stocks Rocks (DSR).

This resource has been managed by my fellow blogger Mike Heroux from the Dividend Guy Blog since 2013. DSR offers more than a weekly newsletter; it’s a complete program to help you manage your portfolio and get better performance with less stress.

You can receive their top picks 2020 (both Canadian and US) by subscribing to his newsletter here. Our readers are eligible for a 45% lifetime discount.

2020 Best Canadian Dividend Stocks

Ticker
Name
Dividend Streak
Dividend Yield
Payout Ratio

CU.TO
Canadian Utilities Ltd
47
4.30%
47.92%

FTS.TO
Fortis Inc
46
3.37%
33.29%

TIH.TO
Toromont Industries Ltd
30
1.53%
28.97%

CWB.TO
Canadian Western Bank
27
3.44%
39.43%

ACO.X.TO
Atco Ltd
26
3.24%
32.21%

TRI.TO
Thomson Reuters Corp
25
2.04%
19.42%

EMP.A.TO
Empire Co Ltd
24
1.48%
26.40%

IMO.TO
Imperial Oil Ltd
24
2.47%
22.14%

MRU.TO
Metro Inc
24
1.48%
27.95%

CNR.TO
Canadian National Railway Co
24
1.81%
33.26%

ENB.TO
Enbridge Inc
25
5.70%
100.69%

SAP.TO
Saputo Inc
19
1.64%
34.02%

CNQ.TO
Canadian Natural Resources Ltd
19
3.58%
42.17%

TRP.TO
TC Energy Corp
19
4.18%
46.58%

CCL.B.TO
CCL Industries Inc
18
1.21%
23.37%

FTT.TO
Finning International Inc
18
3.25%
53.44%

TCL.A.TO
Transcontinental Inc
18
5.59%
45.76%

PLZ.UN.TO
Plaza Retail REIT
17
6.13%
63.89%

RBA.TO
Ritchie Bros Auctioneers Inc
17
1.79%
59.42%

SU.TO
Suncor Energy Inc
17
3.94%
51.35%

CCA.TO
Cogeco Communications Inc
16
1.90%
24.97%

T.TO
TELUS Corp
16
4.46%
70.14%

CGO.TO
Cogeco Inc
15
1.80%
19.40%

SJ.TO
Stella-Jones Inc
14
1.47%
23.92%

IFC.TO
Intact Financial Corp
13
2.16%
61.08%

Footnote: This table contains partial information about the best Canadian dividend stocks of 2020. To view the full information which includes Ticker Name, Sector, Dividend, Streak, Dividend Yield, 5yr Revenue Growth, 5yr EPS Growth, 5yr Dividend Growth, Payout Ratio, and P/E – CLICK HERE TO READ THE FULL TABLE.

My Top Canadian Dividend Stock Recommendations
Sorted in order of dividend streak:

Fortis (FTS.TO) – 46 years of dividend increases

Fortis is probably one of the strongest Canadian dividend stocks you can find on the market. This utility has aggressively reinvested over the past few years, resulting in strong and solid growth of its core business. You can expect FTS revenue to continue to grow, as it is expanding. Strong from its Canadian base business, the company has generated sustainable cash flow leading to four decades of dividend payments. The company has a five-year capital investment plan of approximately $14.5 billion for the period 2018 through 2022, up $1.5 billion from the prior year’s plan. Chances are most of its acquisitions will happen south of our border. FTS’ yield isn’t impressive for a utility (3.50%), but there is a price to pay for such a high-quality dividend grower.

Enbridge (ENB.TO) – 23 years of dividend increases

Enbridge clients enter into 25-year transportation contracts. The company is already well positioned to benefit from the Canadian Oil Sands (as its ,ain line covers 70% of Canada’s pipeline network). As production grows, need for ENB pipelines remain strong. Now that it has merged with Spectra, about a third of its business model will come from natural gas transportation. The company has a handful of projects on the table or in development. ENB saw progressed execution of Line 3 Replacement project in 2019. Canadian segment construction is expected to be completed by the end of May 2020; Minnesota Public Utilities Commission (MPUC) denied all petitions to reconsider its project approvals. Project in-service date targeted for the second half of 2020.

Canadian National Railway (CNR.TO) – 23 years of dividend increases

Canadian National has been known for being the “best-in-class” for operating ratios for many years. CNR improved its operating ratio in 2019 and the company owns unmatched quality railroads assets. With a yield under 2%, we can’t talk about a “strong” dividend payer. However, after digging further, I realized how strong the company’s fundamentals are. CNR has a very strong “economic moat”, as railways are virtually impossible to replicate. Therefore, you can count on increasing cash flow each year. Plus, there isn’t any better way to transport most commodities than by train.

Telus (T.TO) – 15 years of dividend increases

Telus has been showing a very strong dividend triangle over the past decade. The company can grow its revenues, earnings and dividend payouts on a very consistent basis. Telus is very strong in the wireless industry, and are now launching into other growth vectors such as the internet and television services. The company shows the best customer service (read: lower churn) in the wireless industry. It uses its core business to cross-sell its wireline services. The company is particularly strong in Western Canada. Telus is well-positioned to surf the 5G technology tailwind.

Emera (EMA.TO) – 12 years of dividend increases

Emera is a very interesting utility with a solid core business established on both sides of the border. EMA now shows $30 billion in assets and will generate revenues of about $6.3 billion. It is well established in Nova Scotia, Florida and four Caribbean countries. This utility counts on several “green projects” with hydroelectricity and solar plants. Through 2020, EMA intends to invest over $6B in new projects. This decreases the risk of future regulations affecting its business as the world is slowly moving toward greener energy.

CAE (CAE.TO) – 11 years of dividend increases

CAE has developed a close relationship with many of its clients. The switching cost for them is relatively

high, as CAE clearly understands their needs and can improve/modify its training/simulation solutions to evolve with its customer. This creates a high recurring volume of business. With over 160 locations across 35 countries, CAE can meet any international clients’ demands. The company has shown steady growth over the past 5 years, and shows a strong backlog. As the economy continues to grow, demand for commercial and business aviation will remain strong. Therefore, more training will be required.

National Bank (NA.TO) – 9 years of dividend increases

Like BMO, NA aimed at capital market and wealth management to support its growth. Private Banking 1859 has become a serious player in that area. The bank even opened a private banking branch in Western Canada to capture additional growth. Since NA is heavily concentrated in Quebec, it concluded deals to do credit for investing and insurance firms under the Power Corporation (POW). Branches are currently going through a major transformation with new concepts and enhanced technology to serve clients. While waiting for the results, it seems wise to invest in digital features to reach out to the millennials and improve efficiency.

Royal Bank (RY.TO) – 8 years of dividend increases

Over the past five years, RY did well because of its smaller divisions acting as growth vectors. The insurance, wealth management and capital markets push RY revenue. Those sectors now combine to represent about 50% of its revenue. Royal Bank also made huge efforts into diversifying its activities outside Canada. Canadian banks are protected by federal regulations, but this limits their growth. Having a foot outside of the country helps RY to reduce risk and to improve growth potential. Royal Bank shows a perfect balance between revenue growth and dividend growth. It’s a keeper.

Alimentation Couche-Tard (ATD.B.TO) – 2 years of dividend increases;

An investment in ATD is definitely not ideal for an income producing stock. However, if you are looking at the long-term horizon, your dividend payouts will grow in the double digits for a while and you will enjoy a strong stock price growth. ATD’s potential is directly linked to its capacity to swallow and integrate more convenience stores. Management has often proven its ability to pay the right price and generate synergy for each deal. ATD shows a perfect combination of the dividend triangle: revenue, EPS and dividend strong growth.

Intertape Polymer (ITP.TO) – 1 year of dividend increases

A surprise inclusion with my final recommendation this year!  With the rise of online shopping, the packaging industry should benefit from this tailwind. ITP expects to reach $1.5 billion in sales by 2022. Intertape is #1 and #2 in its main market in North America and shows strong international expansion opportunities. Management also expects to grow by acquisition in order to expand its current line of products, consolidate its activities, and open additional doors in international markets. In August 2018, the company completed the acquisition of Polyair Inter Pack for $146M. This was a strategic move to expand ITP’s product offering while opening doors to cross-selling opportunities to PIP’s clients.

A Concluding Look at Canada’s Dividend Growth Stocks Landscape in 2020

For me, I like dividend stocks with a yield above 2.5%, a payout ratio less than 80%, strong financials, and, of course, an established track record of dividend increases.  Once I create a dividend stock watchlist, I wait for them to drop in price to reach a particular dividend yield (when to buy dividend stocks).

As previously mentioned, more due diligence is required before blindly buying companies with the longest history of dividend growth.  For example, from the table above, there are some stocks with red flags such as companies with high payout ratios. The list of stocks in this article should be treated as a starting point for your research.

If you plan on using dividends as a long-term investing strategy, and intend to add to your positions over time, I’ll again recommend Mike Heroux’s Dividend Stocks Rock service. And yes, you do get 45% off the service using the link below.

As we look forward to 2020, remember that in order to be a successful dividend investor, one of the keys is to ignore the daily noise.  Many of these Canadian Dividend Stocks  are companies that have been around for an incredibly long time, and have long established histories of not only surviving ups and downs in the market, but continuing to pay solid dividends over those ups and downs!

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