Top Canadian Dividend Aristocrats of 2024

Companies listed on the TSX that have paid dividends to shareholders for 5 years or longer belong to a class of their own – dividend aristocrats. These companies are generally large and stable enough to pay shareholders – year in and year out – a portion of the profits, and they might even provide a little capital appreciation for those who stay invested long term.

If you’re looking for a reliable source of fixed income, there may be no dividend stock safer than an aristocrat. Below, we’ll delve deeper into the top Canadian dividend aristocrats and help you decide if they have a place in your portfolio holdings.

What are dividend aristocrats?

For a company to be a dividend aristocrat stock, it must meet three criteria:

• The company must be listed on the Toronto Stock Exchange (TSX)
• Its market cap must be at least $300 million.
• It must have increased its dividend for at least five years in a row.

The number of dividend aristocrats in Canada has hovered around 88 to 93 companies.

Many of these aristocrats are blue-chip stocks with large market caps and an established business model allowing little or no leeway for explosive growth. With less focus on growth, the company can spend less capital on business operations and share more profits with shareholders. These blue chips typically produce steady profits so they can continue their dividend programs unabated.

Keep in mind that a company can be a dividend aristocrat even if its dividend yield has stayed the same or decreased. As a reminder, dividend yield is a percentage that tells you how much of a company’s share price is paid out in dividends annually. This yield fluctuates with the market and can be higher or lower based on how well the stock is performing.    

Top Canadian dividend aristocrats

Below are some Canadian dividend aristocrats you might want to consider.

1. Canadian Utilities

Canadian Utilities is Canada’s only dividend king – a company that has increased its dividend but for not just 5 but 50 years.

Yes, for 50 consecutive years – going on 51 – Canadian Utilities has given shareholders a slight increase in their dividend. This is mostly a result of the company having a strong financial footing: as a utility provider, CU provides essential services that customers need regardless of the economy’s health.

Even as a stable and relatively boring stock, Canadian Utilities does have some room for growth, as it’s beginning to transition its electricity generation from fossil fuels to renewable energy. This could attract more customers over the long term, not to mention more investors who want to support that transition.

2. Fortis

Fortis is is one of Canada’s largest utility holding companies – and also one of the oldest Canadian dividend aristocrats. The company has increased its dividend for 48 consecutive years and is now only 2 away from joining Canadian Utilities as a dividend king.

Much like Canadian Utilities, Fortis’ dividend program is bolstered by the company’s recurring revenues. As a utility company, Fortis generates and distributes electricity to over 3.4 million clients. The diversified global energy company has 10 utility operations that stretch from east and west Canada all the way to the Caribbean. ¹

Fortis has an eye on green energy, too, and has committed to eliminating greenhouse gases by 2050.

3. Enbridge

Enbridge is a midstream oil company that operates more than 17,000 miles of active pipelines in North America. As a dividend aristocrat, it has increased its payout for 28 consecutive years. ENB also pays the highest dividend of all dividend aristocrats.

But there are other reasons to consider Enbridge, not just those related to dividends. The company’s oil operations are crucial to Canada’s economy and GDP growth. In 2021 alone, the energy infrastructure giant delivered more than 4 million barrels of crude oil and liquids per day across North America (both across Canada and into the U.S.).²

As such, Enbridge’s oil to the United States represents more than 65% of U.S.-bound Canadian exports and 30% of the crude oil produced in North America. The future of oil stocks is admittedly uncertain. But for the short-term, Enbridge has a powerful hold on the Canadian economy.

Pros of investing in dividend aristocrats

1. Reliable Income Stream

Dividend Aristocrats provide investors with a regular and reliable income through dividends. This is particularly appealing to retirees or those seeking steady cash flow, as it offers some predictability in investment returns, independent of market volatility.

2. Dividend Growth

It’s built into the definition: for these stocks to hold onto to the title of dividend aristocrat, they must increase their payout. Since these companies have a history of increasing dividends, investors can benefit not just from a regular income stream but also from a growing one. If you reinvest those dividends you can also compound your returns.

3. Quality Companies with a Strong Business Model

The requirement to consistently raise dividends over a period typically means that Dividend Aristocrats are fundamentally strong companies with robust business models and financial health. Companies with consistent dividends typically have a strong financial footing.

4. Capital Appreciation

While the main attraction might be the dividends, these stocks also offer the potential for capital appreciation. As businesses grow and increase their dividends, their stock price could also increase, providing investors with a dual benefit.

5. Defensive Strategy

During economic downturns or market volatility, Dividend Aristocrats can offer defensive stability for investors’ portfolios. Companies that can afford to regularly increase dividends are often less sensitive to market cycles, making them safer bets during uncertain times.

6. Dividend aristocrat stocks held in RRSPs and TFSAs come tax-free

You’re not required to pay taxes on dividends when your stocks are held in a tax-sheltered account, such as an RRSP or TFSA.

Cons of investing in dividend aristocrats

1. Lower Dividend Yields

Just because a company must increase its dividend to remain an aristocrat doesn’t mean it will increase it by a large percentage. In some cases, dividend aristocrats may offer lower dividend yields compared to other dividend-paying stocks that do not meet the Aristocrat criteria. This is because the price of Aristocrat stocks can be higher due to their reputation and demand, thereby reducing the yield.

2. Growth Limitations

Companies that focus on regularly increasing dividends might reinvest less of their profits back into the business, potentially limiting their growth compared to companies that reinvest a larger portion of their earnings. This might result in slower stock price appreciation over time. You’ll generally get higher returns on growth stocks than dividend aristocrats.

3. Economic Sensitivity

Although Dividend Aristocrats are considered safer investments during volatile market conditions, they are not immune to economic downturns. Factors such as dropping oil prices can affect companies in the energy sector, regardless of their Dividend Aristocrat status.

Dividend-paying stocks can also be sensitive to changes in interest rates. Rising interest rates often lead to higher yields on fixed-income investments, making them more attractive compared to stocks and potentially leading to a decrease in the stock prices of dividend payers.

4. Lack of Diversification

More than 40% of Canada’s aristocrats belong to the financial and energy sector. While this is symptomatic of the TSX, it still poses a problem for investors whose portfolios already have a large presence of those market sectors.

5. Dividends may be taxable

For dividend aristocrat stocks held in a non-registered retirement account, the CRA will require you to pay taxes.

Should you invest in Canadian dividend aristocrats?

Dividend aristocrats are ideal for investors who want a steady stream of passive income and don’t mind sacrificing upside potential to get it. These stocks might also be beneficial to growth stock investors who want some defensive stocks to bring more stability to an otherwise volatile portfolio.

If you’re looking for growth, however, you might want to look elsewhere. While it’s not rare for a dividend stock to appreciate, their share prices almost never bounce as wildly as small caps and growth stocks.

For those who want decent exposure to a slew of Canadian dividend aristocrats — without having to buy shares in all of them — you might want to consider a dividend aristocrats ETF. Buying one share of an aristocrat ETF allows you to track a broader market, which could add even more stability to an already safe investment.