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Top Dividend Stocks in Canada for 2021 and Developing a Strategy While ‘Dividend Investing’

There are a number of strategies you can adopt while investing in stocks markets. Identifying and investing in discounted stocks can be profitable, despite their low value. Some stocks can be highly competitive in the market and have strong fundamentals. Investing in such stocks can prove to be beneficial in the longer run. It has been identified that in the last decade the technology sector has made a huge amount of money as compared to other sectors. The companies and businesses that grow at a relatively high rate are called growth stocks. Such companies generally have high economic status however they may be undervalued when it comes to selling them. On the contrary, investors can also make money as dividends. In such cases, the company they are working in gives a portion of their profits to the stakeholders.

Basics of Dividend Investment

In dividend investing, people buy stocks of the company and make money by receiving the profit from those stocks. Dividend investing is beneficial because it ensures a steady income for the long term. It is also helpful for people who want to invest money with a lower risk of loss. The companies and businesses that allow dividends to invest in their stock usually run a small business that brings in a good amount of cash. However, it can be risky when the person doesn’t know what he/she is looking for.

Dividend Yield

The dividend yield is also known as forward yield. It is the metrics used by companies to pay dividends. Let’s consider an example of a stock that costs $45.35 per share. The investors have to put in $4535. Now the company pays $3.34 per share annually. This means that the investors will derive $334 per annum. In other words, 7.36% would be the dividend yield which is a really good amount. This profit can either be used to invest again or kept as savings. Regardless of the company’s stock price, the dividend investors will benefit every year. The payment will be released as long as it is authorized by the company’s board of directors. Often dividends are paid on a quarterly basis. However, some companies also pay it monthly. Currently, it is becoming difficult for the companies to maintain this payment due to COVID-19 because many companies have either reduced or completely finished the dividend program. Therefore, before you apply for dividend investment, make sure to do the research on the companies and their income that they generate per year in order to estimate the future of dividend investment.

How to Calculate Dividend Stocks?

In order to evaluate dividend stocks, you have to consider some points. First, you have to decide which company you are selecting for investing in as a dividend and whether it will benefit for a longer-term or not. The next step is to evaluate the following things to ensure a successful dividend investment.

1. Dividend Yield

We have already explained what dividend yield is. Now there is one thing you need to understand that although a higher dividend yield is quite attractive, it is inversely proportional to the stock price. That means a decrease in the stock price of the company will lead to an increase in the dividend yield. Therefore, a high yield can be a red signal for investors. It is expected that the company that is paying dividend funds must be able to maintain funding and increase its growth with time.

2. Payout Ratio

The payout ratio is another important factor while evaluating dividend stocks. It can be calculated by dividing the percentage of the amount earned per share by the amount it gives to the investors per share. Also, the lower payout ratio indicates the ability of the company to invest the profit again in order to grow the company or else increase the dividends.

3. Capital Gains

An increase in the company’s stock price and the dividends paid gives us an estimate of the capital gains. Therefore, the companies that have a higher capital gain must be considered for investing in.

4. Earnings Per Share

Earnings per share, as the name suggests, is the amount of income associated with each share. It is basically the ratio of the total income of the company to the number of dividends it holds. It tells the exact share the company is giving to each dividend investor. Hence you need to identify the companies that are earning more money every coming year. This would ensure a steady dividend payment.

5. Price to Earnings

Price to earnings indicates the expensiveness of the stock. An estimate of the price to earnings can be done by calculating the ratio of the price of a stock to its earnings per share. Note that I’d put the price to earnings if a company is less than its total income and dividend yield, it is not worth it.

How to Avoid the Dividend Yield Trap?

Although dividend yield seems very attractive to people, you just read about several factors that need to be considered while investing in a dividend. It is a complex system and thus inexperienced investors should avoid it or do extensive research before investing in a dividend. In order to protect yourself from falling into the trap of dividends, you need to be alert and check the company’s income status and pay close attention to the payout ratio especially when they are offering higher dividend yields. Companies in which dividend funds increase per annum indicate stability and growth. It is safe to invest there. However, it would be better if you consider buying stock with a lower dividend yield in order to reduce the risk of a big loss. If you are willing to invest in dividend funds for a longer term, consider adopting a dividend reinvestment plan. According to this plan, you reinvest the money earned from the dividend. The investment would be beneficial and cost-free.

Dividends are NOT a Guarantee!

I would like to clear one thing here; dividends are not a guarantee. Several companies suspend the dividends when their company is at loss. Dividends are paid from the profit a company makes. Therefore, when the company is unable to grow, the dividend program automatically fails or is at loss. Therefore, make sure to keep dividend investment as a side business and invest in worthy businesses.

Top Dividend Paying Companies

We’re going to mention some of the most successful dividend-paying Canadian companies. These companies grow per annum and possess good dividend yields that increase per year.

Canadian Utilities

Canadian Utilities is a company that deals with energy, natural gas and electricity business. This company provides services in Alberta, Yukon, and the Northwest Territories. It also deals with the energy infrastructure business and the services like natural gas storage and access to industrial water are available by people living in Canada. The company has been able to maintain dividend payments for 48 years without a break. It has increased the dividend payment at a rate of 9.6% per annum. It is currently trading stock at $33.3 with a forward yield of 5.3%.


Fortis is another leading company dealing with utility stock. Utility companies are at a benefit because their cash flows are predictable since people have to pay the electricity and gas bills at any cost and without any concessions. Fortis is a successful company that produces, transmits, and distributes electricity to an estimated 433,000 residents in Canada, the Caribbean, and the US. Its services are also accessible across the South of the border. The company has paid dividend funds for about 46 years and has shown an increase of 7.4% increase in dividend funds in the last five years. The company is trading for $53.6 with a forward yield of 3.8%.


Atco is one of the largest companies distributing natural gas in Alberta. Most of the dividend investors select this company for investment purposes due to a low-risk appetite. It provides a number of services to people including electric power lines facilities, power plants, and hydrocarbon storage facilities. The company has maintained dividend payments for 26 years without a break. It is known to increase dividend funds by about 13.5% per annum and is currently trading at $40.8, possessing a 4.4% forward yield. So, these are a few companies that are word-selection for dividend investment stocks purposes. These companies have a sound history of dividend stocks payments and are growing too therefore they would be worth the investment. Still, when going for a dividend stocks investment, make sure to consider all the factors explained earlier in the article to ensure a smooth and profitable investment. This would help to identify the red flags as well so you could avoid risky situations. Be very cautious while investing your money. You surely would not want to let your efforts go in vain and this is exactly why we have listed these points for you to notice when going to invest money. Good luck!

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