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Canada’s Leading Dividend Stocks: Insights from Veteran Investors
Every year, Dividend Stocks Rock (DSR) examines over 2,600 investor portfolios to showcase the dividend-paying stocks that are most frequently held by its PRO members. This curated list reflects not trends or headlines, but rather serves as a glimpse into what seasoned investors rely on for dependable income and stability in uncertain markets. In this issue, we highlight three premier Canadian dividend stocks and explore the reasons behind their high ranking. Stay tuned for the U.S. edition next week!
Fortis (FTS.TO / FTS): A Utility Juggernaut Known for Stability
Fortis continuously ranks as a top choice for dividend investors, and rightly so. As a utility firm that primarily specializes in the transmission and distribution of electricity and natural gas, Fortis operates in 18 jurisdictions and enjoys being almost entirely regulated. This results in stable cash flows and few surprises.
Reasons Why Investors Prefer Fortis
– 50 consecutive years of dividend increases
– Stable, rate-regulated operations ideal for tumultuous markets
DSR Bull Argument
Fortis serves regions in Canada, the U.S., and the Caribbean, with 99% of its revenue secured by regulatory agreements. Its significant C$26 billion capital investment initiative is poised to enhance its rate base by 6.5% yearly through 2028. With a long-term commitment to renewable energy infrastructure and an excellent dividend history, Fortis is an archetypal “buy and hold” investment, especially suitable for conservative, income-focused portfolios.
DSR Bear Argument
On the downside, Fortis’s substantial dependence on capital expenditures and debt financing makes it vulnerable to interest rate risks and possible earnings strain. Additionally, with 60% of its revenue derived from the U.S., fluctuations in currency rates could affect results. While it has the advantage of regulated revenue, any change in regulations or policies could hinder growth.
Portfolio Position
Fortis acts as a defensive backbone: ideal for investors who prioritize stability and consistent dividends.
Royal Bank of Canada (RY.TO / RY): A Financial Powerhouse with Extensive Reach
The Royal Bank of Canada holds the title of the nation’s largest bank by market capitalization and is a fundamental component in numerous portfolios. Boasting a varied range of services—including personal banking, wealth management, capital markets, and insurance—RBC symbolizes the pinnacle of financial robustness in Canada.
Reasons It Ranks in the Top 5
– Comprehensive business model that extends beyond conventional banking
– Robust and reliable fee-generated revenue
DSR Bull Argument
Over 50% of RBC’s revenue is generated from non-traditional banking services, providing a buffer against interest rate fluctuations. Its global footprint, dominant share in the Canadian market, and strong brand presence guarantee consistent returns. Attractive dividends and an expansive growth strategy further solidify its standing in long-term portfolios.
DSR Bear Argument
Despite its diversification, RBC is not insulated from macroeconomic challenges. Rising interest rates could adversely affect consumer loan performance, particularly in Canada’s thriving housing market. Risk of credit losses may increase, while heightened regulatory scrutiny and intense competition from international banks could restrain earnings growth.
Portfolio Position
RBC serves as a dependable cornerstone for those aspiring to balance growth with dividend yield. It is a foundational investment for both risk-averse and moderately risk-tolerant investors.
Enbridge (ENB.TO / ENB): A Yield Magnet for Income-Oriented Investors
Enbridge might have seen a slight dip in popularity this year, but it remains one of Canada’s most sought-after income stocks. The company holds a significant share of North America’s energy infrastructure, generating stable, toll-like income from its pipeline operations. For retirees and those seeking income, Enbridge is hard to rival.
Reasons Dividend Investors Gravitate Towards It
– 29 consecutive years of uninterrupted dividend increases
– Revenue model based on tolls ensures income predictability
– Strategic movement towards natural gas and renewable energy infrastructure
DSR Bull Argument
Enbridge’s Mainline system carries 70% of Canada’s oil exports, and its recent foray into natural gas pipelines has diversified its revenue mix. With take-or-pay contracts, essential assets that are difficult to replicate, and ambitious moves into renewable gas and offshore wind, it promises steady, inflation-proof cash flow. Management anticipates EBITDA growth between 7–9% annually through 2026—great news for dividend security.
DSR Bear Argument
The downside? Enbridge’s substantial C$100 billion debt burden. Rising interest rates could jeopardize both dividend growth and financial agility. Regulatory and environmental challenges continue to loom over significant expansion initiatives. Compared to more streamlined, agile competitors, Enbridge’s high debt levels might present a long-term hurdle.
Portfolio Position
Enbridge is a premier income producer. While it may not offer significant capital appreciation, it guarantees stable, increasing payouts well-suited for those prioritizing consistent returns.
Investor Summary