Canada's Top 10 Dividend Stocks to Buy Now

 | Nov 16, 2017 | 5:30 PM EST
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Because of the Canada's strong energy, commodity and financial industries, the country is home to some of the world's best dividend-paying stocks, according to income expert Chloe Lutts Jensen. Below, the contributor and editor of Cabot Dividend Investor reviews her 10 favorite dividend-payers from Canada:

Long-term investors in particular will find a plethora of high-quality, highly consistent dividend stocks in Canada. Using dividend histories, earnings records and dividend payout ratios, I've compiled a list of the top Canadian dividend stocks to buy today.

Bank of Montreal (BMO) is the fourth-largest bank in Canada. BMO pays quarterly dividends that currently yield 3.6%. The company has paid dividends every year for over 100 years, and has increased the dividend twice in the past year, and 10 times in the past five years.

After raising the dividend every year from 1995 to 2008, BMO suspended dividend increases for a few years in response to the financial crisis but never reduced the dividend.

Bank of Montreal is growing steadily through acquisitions and expansion into the U.S. It trades at a P/E of 12 and the company has kept its dividend payout ratio at or below 50% for the past five years. For long-term investors, BMO is a reliable way to generate income year after year.

The Bank of Nova Scotia (BNS) , which goes by Scotiabank, is Canada's third-largest bank. Since 2008, growth has focused primarily on international expansion, and about half of revenues now come from global and international operations.

Revenues and EPS have grown every year since 2008, and growth in both has averaged 6% in each of the last five years. Analysts expect EPS growth to continue to average about 6% per year going forward, after slightly-better-than-average growth (around 8%) this year.

Like BMO, Scotiabank often increases its dividend more than once a year, and growth has averaged 7% per year over the past five years. It currently yields 3.8% and trades at a P/E of 13 and a forward P/E of 12. BNS is a good choice for a relatively high and steadily rising income stream.

Another of the "Big Five" Canadian banks, Canadian Imperial Bank of Commerce (CM) , or CIBC, was named the strongest bank in North America in 2012. About 60% of net income currently comes from its Canadian retail and business banking customers.

The company has paid dividends since 1868, and currently yields 4.7%. Like its peers, CIBC often delivers more than one dividend increase a year if cash flow is growing steadily. Over the past five years, the dividend has grown by an average of 7% per year.

Revenues have grown every year since 2008, averaging about 9% annually. Analysts expect sales to continue growing at about 8% this year and next.

Due to a big pullback in 2015, the stock is a little less expensive than its peers, trading at a P/E of 10. In fact, the stock's lack of progress over the past decade could make the shares a more attractive choice for value investors.

Montreal-based Canadian National Railway (CNI) is Canada's largest railroad. Formerly a holding of the Canadian government, the firm was privatized in 1995.

Its freight network covers most of southern Canada. Since its 1998 acquisition of Illinois Central, the company has also operated in the U.S., where its network stretches from Minnesota to Louisiana.

Earnings per share have grown every year since 2009, by an average of 11% annually. Analysts expect revenue to grow 9% this year and 5% next, fueling EPS growth of 10% and 9%, respectively. Over the next five years, EPS growth is expected to average 7% per year.

The stock yields 1.6% today and the company has increased its dividend every year since 2013. Canadian National is a good choice for long-term income and growth investors.

Calgary-based Canadian Natural (CNQ) is an oil-and-gas exploration, development and production company. Most production is in Canada, but the company also has fields in the North Sea and off the coast of West Africa.

The firm has paid dividends since 2001 (the year after its IPO), but its dividend growth history is mediocre, with long periods of stagnation. The payout ratio is also more volatile than is ideal.

Overall, Canadian Natural is less reliable than the other stocks on this list, given the company's exposure to energy prices. But analysts expect revenues to rise a whopping 51% this year, followed by equally impressive 18% growth next year.

Over the longer term, growth should return to more typical levels, with EPS growth averaging about 4% per year. For medium-term investors who can tolerate some volatility, the current yield of 2.4% may be attractive.

Canadian Pacific Railway (CP) , also based in Calgary, owns about 12,400 miles of track, stretching from Vancouver to Montreal and down to Minneapolis, Chicago and Kansas City. About 22% of traffic is intermodal, 24% is grain, 14% is energy products and chemicals, and 10% is coal.

Though it was founded in 1881, Canadian Pacific went through a restructuring in 2001, so its dividend history is limited. Plus, the stock only yields 1% and boasts only two recent dividend increases.

The dividend was unchanged from 2012 to 2016 as management pursued an ambitious turnaround plan. But the payout ratio remained below 50% throughout the turnaround, and has been below 20% for the past two years.

The turnaround has left the company in much better shape going forward, with a lower cost basis and higher cash flow. These improvements are expected to contribute to 11% EPS growth this year and 13% growth next year. Forward-looking investors can expect good dividend growth from CP.

Founded in Montreal in 1984, Gildan (GIL) is one of the largest apparel manufacturers in the world. Most of Gildan's blank t-shirts, sweatshirts and other basics are sold to screen printers in the U.S. and Canada.

The company acquired the American Apparel brand in a bankruptcy auction earlier this year, further cementing its position as the dominant supplier of printwear. Revenues have increased every year since 2009, and are expected to grow about 5% this year and next.

Gildan has only paid dividends since 2011, but its five increases have averaged 20% each, plus the company paid a special dividend in the first quarter of 2015. And the company's payout ratio is low, at 22%, so there's plenty of room for growth.

Analysts expect EPS growth of 13% this year and 11% next year, but long-term growth is projected to be even higher, averaging 15% over the next five years. Investors who like dividend growth can expect it from 1.3%-yielding Gildan.

Magna International (MGA) is the largest North American manufacturer of auto parts. It has paid dividends since 1992, but suspended the dividend for a year in 2009.

Dividend payments were resumed -- at the same level -- in 2010, and Magna has increased the dividend every year since, by an average of almost 30%. At the current rate of $0.28 per quarter, MGA yields 2%.

Analysts expect revenues to rise 6% this year and 8% next year, fueling EPS gains of 14% and 10%, respectively. Over the next five years, EPS growth is expected to average 11% per year. Magna's payout ratio is only 19%, so there's plenty of room for the dividend to grow.

The second-largest Canadian bank, Royal Bank of Canada (RY) was founded in 1864, but has only paid dividends since 1996. Management has increased the dividend twice a year since 2011, with the growth rate averaging 8% per year.

Since the financial crisis, the bank has pursued growth primarily by expanding its offerings beyond retail banking. The bank now has operations in wealth management, insurance, capital markets and treasury services for institutional investors, as well as personal and commercial banking.

In 2015, Royal Bank bought U.S.-based City National, a private and commercial bank, to expand its wealth management and capital markets presence south of the border. Approximately 23% of revenues now come from the U.S., 17% from other international markets and 60% from Canada.

Revenues have increased every year since 2010, and EPS every year since 2009. Going forward, analysts expect EPS growth to average 6% a year, including 10% growth this year followed by a return to more average growth in 2018. Investors looking for slow but steady dividends growth will find a lot to like with RY.

Canada's largest bank, Toronto-Dominion Bank (TD) , was created in 1995 by the merger of Bank of Toronto and The Dominion Bank. The bank has paid dividends every year since, and has increased the payout every year since 2001.

Dividend growth was halted for a few years after the financial crisis, but the highest the dividend payout ratio got was 65%, and the dividend was never reduced. Since 2010, TD has kept the payout ratio under 50%.

Earnings per share have increased every year since 2009, by an average of 13%. Analysts expect EPS growth to average about 7% over the next five years. This year and next, revenues are expected to rise about 2% and 5%, fueling 14% and 6% EPS growth, respectively. Toronto-Dominion is another solid pick for investors looking for reliable income and slow but steady dividend growth.

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