6 Best Canadian Dividend Stocks for US and Canadian Investors

Today we go to the north of the border to find some of the best dividend stocks Canada has to offer. Each of these stocks is listed on an American Exchange as well as a Canadian Exchange, and is therefore easily bought and sold by both my US and Canadian readers.

These 6 stocks have been shortlisted for their dividend yield, a solid dividend coverage, and their current valuations based on key ratios such as Price to Earnings and Price to Book Value. A further study of these 6 ideas is sure to uncover a great investment or 2 to add to your portfolios. Please note that each stock in this list has a payout ratio under 40%.

American readers who may be worried about the tax issues of Canadian dividend payments should keep in mind that while Canadian tax maybe withheld at the source when the dividends are paid, these can be adjusted against the US tax rate when you file your income taxes. Normally the impact is minimal and there is just simple addition to your filing that any competent accountant or a tax software can easily handle.

Banks and Insurance

Canadian banks have traditionally been conservative and strong operators and largely escaped the financial crisis unscathed. Additionally they have been great income generators. Today as the oil and commodities cycles try to find bottom, most Canadian banks have found their stock punished. It makes sense in some ways – the credit issued by these banks make these drilling and mining operations possible – and Canada is especially a resource rich country where the booms and busts in these sectors are more visible in the general economy.

This list contains 2 banks and an insurance company.

Bank of Montreal (BMO)

BMO currently yields about 4.5% and can be purchased at just 11.5 times earnings. It is a full service bank with over 1500 bank branches and serves retail as well as institutional clients. It is also one of the few available negative enterprise value stocks in the market with an EV of -33.64B.

Bank of Nova Scotia (BNS)

The Bank of Nova Scotia provides various personal, commercial, corporate, and investment banking services in Canada and internationally. At a PE of 10.3 the stock is very attractively priced and yields about 4.85%. At EV of -68.65B, the stock is worth checking further.

Sun Life Financial Inc (SLF)

Sun Life Financial is a property and casualty insurer that provides, life, long term care and other insurance products as well as savings and retirement products such as mutual funds, stock plans, etc. The stock can be purchased today at 11.5 times earnings and yields about 4%. The stock sports an EV of about -28B.

Other Sectors

Brookfield Canada Office Properties (BOXC, Commercial REIT)

Brookfield Canada Office Properties is a commercial REIT that invests in  properties in Calgary, Ottawa, Toronto, and Vancouver. It owns and develops the properties in its portfolio. The stock trades at 7.3 times earnings and yields 4.66%. It is also valued at a discount to its book value with Price to Book multiple of just 0.75. As a REIT, the debt levels are quite high. As a potential investor, you need to have a good understanding of the Canadian Commercial Real Estate market and some idea of whether it is in a bubble or not.

Mercer International Inc (MERC, Paper and Paper Products)

Mercer International Inc., manufactures and sells northern bleached softwood kraft (NBSK) pulp worldwide to tissue, specialty papers, and printing and writing paper manufacturers. The stock yields well over 6% and can be purchased at less than 8 times earnings. The stock is currently trading at a 52 week low.

TransAlta Corp (TAC, Utilities)

TransAlta Corporation operates as a non-regulated electricity generation and energy marketing company in Canada, the United States, and Western Australia. The company’s Generation segment owns and operates hydro, wind, and natural gas- and coal-fired facilities. The stock is trading at close to its 52 week lows, at 8.5 times earnings and yields a respectable 3.27% after a recent dividend cut. The company is focusing on clean energy and phasing out coal power in Alberta.

We do not own a position in any of the stocks mentioned above in the Value Stock Guide Portfolio. However if a further review finds any of these stocks desirable, they may be added to the portfolio.


  1. says

    Thanks for another good post with some interesting stocks.

    Do you have a suggestion for learning about REITs? I am going to sell one of my rental properties (I like it as an investment but don’t like the hassles and the low cash flow for this particular property). Basically I would like to purchase some REITs (with some of the cash from the sale) that just gives me the investment profile of owning a share of a bunch of houses/apartments. But looking at REITs, many have complicated structures where they seem to love high leverage and taking substantially more risk than just buying and managing properties.

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