By Frugal Trader

Special to the Financial Independence Hub

As we update our list of the Best Canadian Dividend Stocks for 2022, we continue to focus on four key areas:

• Dividend Yield
• Dividend Growth Consistency
• Earnings Per Share
• Overall Company Revenues

As we head into Q3, Canadian dividend stocks have continued to reward our confidence in them. While high-flying tech stocks have gotten slaughtered (and then recovered a little bit), and European stocks continue to see their growth evaporate, Canadian oligopolies continue to churn out dependable dividend growth. With Canadian forward P/E now at 12 – well below their historical average of 14 – there is no better place to be in terms of equity exposure if you prize caution and dividend yield.

Admittedly, Canadian energy dividend stocks could have been higher on this list, but we have benefitted from the energy price rise with our mid-stream picks. Much as we anticipated, Canadian bank stocks, Canadian utility stocks, and Canadian telecommunications stocks have proven quite resilient.

While they have suffered drawdowns at times due to market-wide momentum, they have held up quite well, and earnings reports have supported the long-term viability of their dividends.

While many companies around the world are seeing their bottom lines chewed up by increasing costs, our top Canadian dividend stocks continue to show the pricing power that made us so confident in recommending them in the first place.

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As a longtime dividend investor (I’ve had a Canadian dividend investing portfolio for over 15 years now, since I started the Smith Manoeuvre) I’ve learned that while current dividend yield is a beautiful thing, it’s the long-term dividend growth and earnings per share (EPS) that will really drive your overall portfolio returns.

My personal selection for the top dividend stocks for long-term investments are available below.

Our Top 10 Canadian Dividend Growth Stocks (September 2022)

Here’s a look at our top 10 long-term Canadian dividend stocks in order of their dividend increase streak.

For my full 32-stock list of Canadian dividend earners that I’m buying today – as well as the 74-stock list of US Dividend all stars that I recommend – check out the platform that I personally use to do my dividend stock research.

Note: Data on this article updates periodically. If you are looking for real time data and guidance, read our recommendation below.

More Up to Date Canadian Dividend Stocks Data

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2022 Canadian Dividend Update

With payout ratios like the ones above, combined with those really solid Earnings Per Share numbers – we remain strong in our belief that there are no better options for investors who want stable long-term growth combined with free cash flow.

With inflation fears now dominating the media news cycle, we see more than ever that companies with solid balance sheets and oligopoly-driven moat stocks are the smart long-term play. Companies that can pass along those inflation-fuelled rise in costs have historically outperformed during inflation cycles.

Frankly, I think all of this talk about inflation might be a bit overdone, and that it’s likely to come down to the 3-3.5% range next year. At that rate, it’s really only a mild concern in the grand scheme of things. I’d be much more worried if this was deflation we were talking about!

Our list of top Canadian inflation stocks explains exactly which companies we believe are best positioned in order to pass along the inevitable price increases and increased costs that will come along in 2022.

Of course we remain committed to our long-term strategy of balancing EPS with a company’s ability to grow its dividend, in order to allocate our personal dividend nest egg.

Afterall, the only thing better than a high dividend yield today, is a much larger (and increasing) one tomorrow!

Check out our in-depth Dividend Stocks Rock Review for a deeper dive on just why we trust the service so much, and more details on our exclusive promo offer code.

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My Top Canadian Dividend Stock Recommendations

Sorted in order of dividend streak:

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Fortis (FTS.TO) – 48 Years of Dividend Growth

• 3.67% Dividend Yield
• 6.68% 5 Year Revenue Growth
• 6.10% 5 Year Dividend Growth
• 79.85% Payout Ratio
• 22.06 P/E

Investment Thesis:

Fortis aggressively invested over the past few years resulting in strong and solid growth from its core business. You can expect FTS’s revenues to continue to grow as it continues to expand. Strong from its Canadian based businesses, the company has generated sustainable cash flows leading to four decades of dividend payments.

The company has a five-year capital investment plan of approximately $19.6 billion for the period 2021 through 2025. Only 33% of its CAPEX plan will be financed through debt. Nearly two-thirds will come from cash from operations. Chances are most of its acquisitions will happen in the US.

We also like the FTS goal of increasing its exposure to renewable energy from 2% of its assets in 2019 to 7% in 2035. The FTS yield isn’t impressive at around 3.70%, but there is a price to pay for such a high-quality dividend grower.

Dividend Growth Perspective:

Management increased its dividend 6% in 2019 and 2020 and has declared that it expects to increase dividends by 6% annually until 2025. We like it when companies show motivation for growth (through acquisitions) and reward shareholders at the same time!

After all, Fortis is among those rare Canadian companies who can claim it has increased its dividend for 48 consecutive years. Fortis is a great example of a “sleep well at night” stock.

Enbridge (ENB.TO) – 26 Years of Dividend Increases

• 6.38% Dividend Yield
• 6.37% 5 Year Revenue Growth
• 9.52% 5 Year Dividend Growth
• 117.23% Payout Ratio
• 22.30 P/E

Investment Thesis:

ENB’s customers enter 20-25-year transportation contracts. It is already well positioned to benefit from the renewed profits of the Canadian Oil Sands (as its Mainline covers 70% of Canada’s pipeline network).

As production grows, the need for ENB’s pipelines remains strong.

After the merger with Spectra, about a third of its business model will come from natural gas transportation. Enbridge has a handful of projects on the table or in development. It must deal with regulators notably for their Line 3 and Line 5 projects. Both projects are slowly but surely developing.

The cancellation of the Keystone XL pipeline (TC Energy) secures more business for ENB for its liquid pipelines. ENB has now a “greener” focus with their investments in renewable energy. The stock offers a yield over 6% which makes it a strong candidate for any retirement portfolio.

Dividend Growth Perspective:

The company has been paying dividends for the past 65 years and has 26 consecutive years with an increase.  While it’s probable dividend growth won’t be as generous as compared to the past three years (10%/year), the current generous yield makes up for it. Management aims at distributing 65% of its distributable cash flow, leaving enough room for CAPEX.

Look for their latest quarterly presentation for their payout ratio calculation. Management expects distributable cash flow growth of 5-7%. Therefore, you can expect a similar dividend growth rate. We have used more conservative numbers in our DDM calculation.

Canadian National Railway (CNR.TO) – 26 Years of Dividend Increases

• 1.90% Dividend Yield
• 3.76% 5 Year Revenue Growth
• 10.40% 5 Year Dividend Growth
• 35.57% Payout Ratio
• 21.17 P/E

Investment Thesis:

Canadian National has been known for being the “best-in-class” for operating ratios for many years. CNR has continuously worked on improving its margins. The company also owns unmatched quality railroads assets.

CNR has a very strong economic moat as railways are virtually impossible to replicate. Therefore, you can count on increasing cash flows each year. Plus, there isn’t any more efficient way to transport commodities than by train. The good thing about CNR is that you can always wait for a down cycle to pick up some shares. There’s always a good occasion around the corner when we look at railroads as attractive investments.

Finally, the cancellation of the Keystone XL pipeline has driven more oil transportation toward railroads. CNR has benefitted from this tailwind.

In 2021 CNR entered a bidding war against CP to buy the Kansas City Southern Railroad.  When the deal fell through for CNR, and the company announced a renewed focus on efficiency, long-term investors were rewarded handsomely as the stock shot up in value.

Dividend Growth Perspective:

CNR has successfully increased its dividend yearly since 1996. The management team makes sure to use a good part of its cash flow to maintain and improve railways, all while rewarding shareholders with generous dividend payments.

CNR shows impressive dividend records with very low payout ratios. While the business could face headwinds from time to time, its dividend payment will not be affected. Shareholders can expect more high-single-digit dividend increases.

Telus (T.TO) – 18 Years of Dividend Increases

• 4.58% Dividend Yield
• 5.76% 5 Year Revenue Growth
• 6.68% 5 Year Dividend Growth
• 103.38% Payout Ratio
• 22.10 P/E

Investment Thesis:

Telus has grown its revenues, earnings, and dividend payouts on a very consistent basis. It is very strong in the wireless industry and is now attacking other growth vectors such as the internet and television services.

The company has the best customer service in the wireless industry as defined by their low churn rate. It uses its core business to cross-sell its wireline services. Telus is particularly strong in Western Canada, but has the recent Rogers turmoil to increase market share throughout the country.

Telus is well-positioned to surf the 5G technology tailwind. This Canadian telecom stalwart looks at original (and profitable) ways to diversify its business. Telus Health, Telus Agriculture and Telus International (artificial intelligence) (TIXT.TO) are small, but emerging divisions that should lead to more growth going forward.

Dividend Growth Perspective:

This Canadian Aristocrat is by far the industry’s best long-term dividend-payer (as opposed to short-term yield). Telus has a high cash payout ratio as it puts more cash into investments and capital expenditures.

Capital expenditures are always taking away significant amounts of cash due to their massive investment in broadband infrastructure and network enhancement. Such investments are crucial in this business.

Telus fills the cash flow gap with financing for now. At the same time, Telus keeps increasing its dividend twice a year showing strong confidence from management.

Emera (EMA.TO) – 15 Years of Dividend Increases

• 4.31% Dividend Yield
• 6.15% 5 Year Revenue Growth
• 5.24% 5 Year Dividend Growth
• 128.82% Payout Ratio
• 29.42 P/E

Investment Thesis:

Emera is a very interesting utility with a solid core business established on both sides of the border. EMA now shows $32 billion in assets and will generate annual revenues of about $6 billion. It is well established in Nova Scotia, Florida, and four Caribbean countries.

This utility is counting on several “green projects” consisting of both hydroelectric and solar plants. Between 2021 and 2023 management expects to invest $7.4 to $8.6B in new projects to drive additional growth. These investments decrease the risk of future regulations affecting its business as the world is slowly moving toward greener energy.

Most of its CAPEX plan will be deployed in Florida where Emera is already well established. In general, Florida offers a highly constructive regulatory environment. In other words, EMA shouldn’t have any problems raising rates. This is another “sleep well at night” investment.

Dividend Growth Perspective:

Emera has been increasing its dividend payments each year for over a decade. With the purchase of TECO energy management intends to continue that tradition. The company forecasts a 4-5% dividend growth rate through 2022, while targeting a payout ratio of 70-75%.

At a 4%+ dividend yield, this is a keeper for several years. Don’t get fooled by the high payout ratio, as the adjusted earnings show a payout ratio around 80% including the recent dividend growth. This is the type of company that fits perfectly in a retirement portfolio.

National Bank (NA.TO) – 12 Years of Dividend Growth

• 4.23% Dividend Yield
• 8.14% 5 Year Revenue Growth
• 5.43% 5 Year Dividend Growth
• 31.37% Payout Ratio
• 8.94 P/E

Investment Thesis:

NA has targeted capital markets and wealth management to support its growth. Private Banking 1859 has become a serious player in that arena. The bank even opened private banking branches in Western Canada to capture additional growth.

Since NA is heavily concentrated in Quebec, it concluded deals to do credit for investing and insurance firms under the Power Corp. (POW). The stock has outperformed the Big 5 for the past decade as it has shown strong results.

National Bank has been more flexible and proactive in many growth areas such as capital markets and wealth management. Recently, NA is seeking additional growth vectors by investing in emerging markets such as Cambodia (ABA bank) and in the U.S. through Credigy.

Can it have more success than BNS on international grounds? It looks like they may have found the magical formula to do so!

Dividend Growth Perspective:

National Bank has been one of the most generous banks over the past five years – which is not bad considering the company had to take a pause in its dividend increases between 2008 and 2010 due to the financial crisis.

The bank also had to pause its dividend growth in 2020-2021 and wait for regulations to be lifted. It finally happened at the end of 2021 and the bank rewarded their shareholders’ patience with a dividend increase of 23% (to $0.87/share).

Alimentation Couche-Tard (ATD.B.TO) – 12 Years of Dividend Growth

• 0.89% Dividend Yield
• 9.55% 5 Year Revenue Growth
• 18.74% 5 Year Dividend Growth
• 12.30% Payout Ratio
• 16.83 P/E

Investment Thesis:

If you are looking at the long-term horizon, your dividend payouts should grow in the double digits, and you also should enjoy strong stock price growth. ATD’s potential is directly linked to its capacity to acquire and integrate additional convenience stores.

Management has proven its ability to pay the right price and generate synergies for each deal. ATD shows a perfect combination of the dividend triangle: revenue, EPS, and strong dividend growth.

After a few deals that didn’t happen, management turned around with a business model including lots of organic growth potential. This is a rare opportunity on the market.

Dividend Growth Perspective:

The mediocre current 0.89% dividend yield is so low, that ATD might failed to be considered as a dividend grower. However, the dividend payout has surged in the past 5 years (+94%) and the stock price jumped by over 45% (including the stock price drop in early 2020).

The only reason why the dividend yield is so low, is that ATD is on a fast track for growth. ATD will continue steadily increasing its payout, while providing stock value appreciation to shareholders.

Algonquin Power & Utilities (AQN.TO) – 11 Years of Dividend Growth

• 5.11% Dividend Yield
• 21.53% 5 Year Revenue Growth
• 8.79% 5 Year Dividend Growth
• 165.34% Payout Ratio
• 47.10 P/E

Investment Thesis:

Like many utilities in North America, solid growth is coming from outside the company. AQN had about 120K customers in 2013 and now serves over 800K customers. It achieved this impressive growth through acquisitions.

The company “did it again” through the recent acquisition of Kentucky Power. The transaction is expected to close in Q2 2022 and should add another 165K customers. With a budget of $9.2B in CAPEX, AQN has several projects pending through 2025. These include more acquisitions, pipeline replacements and organic CAPEX.

The utility counts on its regulated businesses to grow its revenue once those projects are funded. AQN shows a double-digit earnings growth potential for the foreseeable future but expect a short-term slowdown due to an aggressive leverage strategy and more common shares being issued.

Dividend Growth Perspective:

The dividend fluctuations are due to currency as the company once paid its dividend in CAD, and now it is in USD. As a Canadian company, 93% of AQN’s EBITDA is from the U.S. Therefore, there is no reason to worry about the company’s cash distribution.

AQN shows an ambitious capital expenditure (CAPEX) budget through 2025. These investments will drive earnings higher, and shareholders will be rewarded accordingly. Shareholders can expect a single high-digit dividend growth rate for the next decade.

Royal Bank (RY.TO) – 11 Years of Dividend Increases

• 4.20% Dividend Yield
• 5.67% 5 Year Revenue Growth
• 5.92% 5 Year Dividend Growth
• 39.02% Payout Ratio
• 11.09 P/E

Investment Thesis:

Royal Bank counts on many growth vectors including insurance, wealth management, and capital markets divisions. These sectors now represent over 50% of its revenue. These are also the same segments that helped Royal Bank to stay the course during the pandemic.

Royal Bank has made huge efforts in diversifying its activities outside of Canada and has a highly-diversified revenue stream to offset interest rate headwinds. Canadian banks are protected by federal regulations and enjoy an oligopoly, but this generally limits their long-term growth.

Having a foot outside of the country helps RY to reduce risk and improve its growth potential. The bank posted impressive results for the latest quarter driven by strong volume growth and market share gains which offset the impact of low interest rates.

Royal Bank shows a perfect balance between revenue growth and dividend growth and is likely to increase its dividend accordingly.  It is amongst the safest (worth paying for quality) of Canada’s big banks.

Dividend Growth Perspective:

Royal Bank has a “tradition” of increasing its dividend twice a year. In normal times, you can count on two low-single-digit dividend increases each year. It paused its dividend growth policy between 2008 and 2010, but came back with the double-digit dividend growth tradition in 2012.

Regulators put a hold on dividend increases for all banks in 2020 and Canadian banks were waiting for approvals from the regulators.  As soon as they got the official go ahead in the fourth quarter of 2021, RBC rewarded investors with a 11% dividend hike.

Intertape Polymer (ITP.TO) – 3 Years of Dividend Increases

• 2.18% Dividend Yield
• 12.40% 5 Year Revenue Growth
• 2.78% 5 Year Dividend Growth
• 57.14% Payout Ratio
• 28.14 P/E

Investment Thesis:

With the rise of online shopping, the packaging industry should benefit from this tailwind. ITP is #1 and #2 in its main markets in North America and shows many international expansion opportunities.

Management also expects to grow by acquisition to expand its current line of products, consolidate its activities, and open additional doors to international markets. In August 2018, the company completed the acquisition of Polyair Inter Pack for $146M.

In 2021, ITP announced the acquisition of Nuevopak for $44M. This was a strategic move to expand ITP’s product offerings while opening doors to cross-selling opportunities. ITP is also investing massively to expand production capacity of water-activated tapes, woven fabrics, protective packaging and films.

Dividend Growth Perspective:

ITP doesn’t increase its dividend every year. That is the price you pay for a growth by acquisition business model.

At least they show solid payout ratios. Keep in mind the dividend payment is in USD (currently $0.17USD/share). Therefore, the dividend growth line on the graph is fluctuating.

Don’t expect regular dividend increases as the company uses most of its cash for acquisitions to increase its total revenues. The company has been generous with three consecutive dividend increases over the past three years. It may earn a dividend safety score of 4 if it can increase its payout in 2022.

ITP has improved its cash flow generation abilities over the past 12 months, and this should help for future potential dividend increases.

Canadian Dividend Stocks with 10 Years of Dividend Increases

The year 2021 has been one of intense change and turmoil. The COVID-19 pandemic has forced us to review each company in our portfolio and review their business model. Some will survive and thrive, while others will have a hard time surviving this crisis.

The point here is not to change my list, but to add more perspective now that we know more about the nature of the economic lockdown. Some companies are great, but they just don’t function well when their doors are closed!