Canadian Dividend Aristocrats: 5 Dividend-Paying Stocks to Consider for Your Portfolio

Investing is a critical part of your financial plan. These 5 Canadian dividend aristocrats are great choices to add to your portfolio.

A company that generates regular profits can choose to allocate a portion of them to shareholders in the form of dividends, making dividend investing one of the main strategies to create wealth in the equity markets. With this approach, investors can benefit from a passive income stream that can be withdrawn or reinvested to take advantage of the compounding effect.

These companies, known as dividend aristocrats, have managed to increase their dividend yields for at least 25 consecutive years.

1. Canadian Utilities

Canadian Utilities is engaged in the electricity, natural gas, and energy industries. Its utilities business provides regulated electricity transmission and distribution services in the Yukon, northern and central east Alberta, and Northwest Territories.

The company also owns and operates 9,000 km of natural gas pipelines, 16 compressor sites, and 3,700 receipt and delivery points. Canadian Utilities’ energy infrastructure business provides electricity generation, natural gas storage, industrial water to regions in Canada.

Canadian Utilities has managed to increase its dividend payments for 48 consecutive years. In the last five years, it has increased dividends at an annual rate of 9.6%. Canadian Utilities stock is currently trading at $33.3 indicating a forward yield of 5.3%.

2. Fortis

Another utility stock on the list of Canadian dividend aristocrats is Fortis. Utility companies are regulated, which helps them generate stable and predictable cash flows. People will continue to pay their electricity and gas bills even when they are unemployed making this industry fairly recession-proof.

Fortis is an electric gas and utility company that generates, transmits, and distributes electricity to 433,000 retail customers in Canada, the U.S., and the Caribbean. It also sells wholesale electricity to enterprises south of the border.

Fortis has managed to increase its dividend payments for 46 consecutive years. In the last five years, it has increased dividends at an annual rate of 7.4%. Fortis stock is currently trading at $53.6 indicating a forward yield of 3.8%.

3. Toromont Industries

Another Canada-based Dividend Aristocrat is Toromont Industries, a company that provides specialized capital equipment in Canada and other international markets. Toromont Industries has two primary business segments that include CIMCO and Equipment Group.

The CIMCO business is involved in the design, engineering, installation, and after-sale support of refrigeration systems for the industrial markets. The Equipment business segment is involved in the sale, rental, and service of mobile equipment for Caterpillar and other manufacturers.

Toromont has increased its dividend payments for 30 consecutive years. In the last five years, it has increased dividends at an annual rate of 12.5%. Toromont stock is currently trading at $89.4 indicating a forward yield of 1.4%.

4. Atco

Atco is Alberta’s largest natural gas distribution company and is an ideal Canadian dividend aristocrat for investors with a low-risk appetite. It has a diversified base of cash-generating assets including power plants, electric power lines as well as hydrocarbon storage facilities.

Atco has 15 commercial real estate properties, 90,000 square feet of industrial property, and 315 acres of land. As its earnings are regulated, you can expect Atco’s cash flows to be predictable. The stock is trading at a depressed valuation with a price to book ratio of just 1.15x.

Atco has increased its dividend payments for 26 consecutive years. In the last five years, it has increased dividends at an annual rate of 13.5%. Atco stock is currently trading at $40.8 indicating a forward yield of 4.4%.

5. Thomson Reuters

One of the best-performing stocks on the TSX is Thomson Reuters, an information service provider. Thomson Reuters has clients across industries including law, tax, accounting, financial services, and healthcare. Since the start of 2012, the stock has returned 265%.

The company has high operating leverage. While sales were up 2% in Q4 of 2020, its EBITDA soared 33% to $525 million, indicating a margin of 32.5%. In 2020, its adjusted EBITDA rose by 33% to $2 billion.

Thomson Reuters has increased its dividend payments for 26 consecutive years. In the last five years, it has increased dividends at an annual rate of 3.5%. Thomson Reuters stock is currently trading at $109.31 indicating a forward yield of 1.9%.

The final takeaway

We can’t completely eliminate risk while holding dividend stocks in our portfolio. However, investors can lower their risk exposure and get a passive income stream by buying blue-chip dividend-paying companies like these Canadian dividend aristocrats.

Note that the forward yields quoted are on a pre-tax basis. To learn how tax impacts your dividend earnings, check out my post on Taxation Rules for Savings Vehicles!

If you want to earn a stable income, you should focus on companies that have a wide economic moat, solid fundamentals, and cash-generating assets.

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