The Bank of Canada has lowered its benchmark index from 5% in June 2024 to 2.75% through seven rate cuts. Moreover, economists are predicting more cuts this year. In this low-interest-rate environment, investors can look at investing in quality dividend stocks to earn a stable passive income. Against this backdrop, let’s look at three Canadian dividend stocks that offer yields of over 5%.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) operates in over 20 countries, offering various financial services. Given its diversified revenue streams, the company generates stable and reliable cash flows, allowing it to pay dividends uninterrupted since 1833. Additionally, the company has also raised its dividends at an annualized rate of 4.9% for the last 10 years, with its forward dividend yield currently standing at 5.6%.
Moreover, BNS is continuing with its long-term strategy of strengthening its footprint in the lower-risk, less volatile North American market, while scaling back its operations in the Latin American market. Additionally, the company has witnessed improvement in its operating metrics, such as the CET1 (Common Equity Tier 1) capital ratio, Tier 1 capital ratio, leverage ratio, and TLAC (Total Loss-Absorbing Capacity) ratio, in the recently reported second-quarter earnings for fiscal 2025. The company’s board in May approved the repurchase of around 20 million shares over the next 12 months, which could lower its outstanding shares by 1.6%. Considering all these factors, I believe BNS could continue rewarding its shareholders with healthy dividends.
Canadian Natural Resources
Another Canadian dividend stock that I am bullish on is Canadian Natural Resources (TSX: CNQ), which produces and sells oil and natural gas. Its balanced and diversified assets, lower capital reinvestment requirements, and effective and efficient operations have reduced its expenses, thereby driving its profitability and generating healthy cash flows. Supported by these healthy and reliable cash flows, the Calgary-based energy company has increased its dividend at a 21% CAGR (Compound Annual Growth Rate) for the last 25 years. Meanwhile, it currently offers a healthy forward dividend yield of 5.7%.
Moreover, CNQ has larger reserves, with around 32 years of proven reserve life index. Also, these reserves mostly contain high-quality petroleum products. Further, the company is boosting its production capabilities through capital investments of around $6 billion for this year. Considering its growth prospects, I expect CNQ to continue with its dividend growth, making it attractive for income-seeking investors.
Telus
Telecommunication services have become essential in this digitally connected world and the digitization of business processes. Besides, these companies enjoy healthy cash flows due to their recurring revenue sources. Therefore, I have chosen Telus (TSX: T), one of three prominent Canadian telecom players, as my final pick. Meanwhile, the Vancouver-based telco has raised its dividend 28 times since May 2011 and currently offers an attractive dividend yield of 7.3%.
Further, the company has planned to invest around $70 billion over the next five years to expand its 5G network and broadband connectivity across Canada. These expansions could support its financial and cash flow growth. Additionally, it has signed an agreement to sell a 49.9% stake in its Canadian wireless tower infrastructure for $1.3 billion, which could strengthen its balance sheet. Moreover, Telus’s management expects to raise its dividend at an annualized rate of 3–8% over the next three years through 2028. Considering all these factors, I believe Telus would be an ideal buy to earn passive income.
