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What are we looking for?

Top-quality Canadian stocks with dividend yields of 5 per cent or more that are highly sustainable.

The screen

Investors like high-paying dividend stocks as a source of income. Still, they should avoid the temptation of focusing solely on above-average yields.

That’s because a high yield may signal danger rather than a bargain if it reflects widespread investor skepticism about the company’s ability to keep paying its current dividend. (Dividend yield is calculated as the annual payout divided by the current stock price, so a weakening share price will boost the yield figure.) A dividend cut, if it occurs, always undermines investor confidence and can quickly push down the share price further.

As a measure of stability, our Dividend Sustainability Ratings let us focus on stocks that have maintained or raised their dividends during economic or stock-market downturns. Generally, these firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they also provide an attractive mix of safety, income and growth.

We started this search with an extensive list of dividend-paying Canadian companies, before singling out those offering yields of 5 per cent or more. We then applied our TSI Dividend Sustainability Rating System to home in on the top dividend payers. Our system awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Top-quality Canadian stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Bil.)1Y Ttl. Rtn. (%) Recent Price ($)
1Enbridge Inc.ENB-THighest117.197.913.648.65
2TC Energy Corp.TRP-THighest115.957.82.458.90
3BCE Inc.BCE-THighest115.360.213.665.69
4Pembina Pipeline Corp.PPL-TAbove Average96.620.811.538.23
5Great-West Lifeco Inc.GWO-TAbove Average95.235.028.437.82
6Keyera Corp.KEY-TAbove Average86.
7Suncor Energy Inc.SU-TAbove Average85.445.334.131.33
8TransAlta RenewablesRNW-TAbove Average85.

Source: Dividend Advisor. *Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.

Great-West Lifeco Inc., headquartered in Winnipeg, is one of Canada’s insurance giants, while Montreal-based BCE Inc. is one of the country’s largest telecoms.

The remaining six names on our list are all based in Calgary. Suncor Energy Inc. is Canada’s largest integrated oil firm, with major projects in the Alberta oil sands, refineries and Petro-Canada gas stations. Pipeline operators TC Energy Corp. and Enbridge Inc. have strong cash flow and growth projects to keep dividends rising. Pembina Pipeline Corp. is another energy transportation provider in Canada and the United States, and Keyera Corp. is one of our largest midstream oil and gas operators. TransAlta Renewables Inc. is a major Canadian producer of wind, hydroelectric and solar power.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/02/24 11:59pm EST.

SymbolName% changeLast
Enbridge Inc
TC Energy Corp
Pembina Pipeline Corp
Great-West Lifeco Inc
Keyera Corp
Suncor Energy Inc

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