Should You Buy the 2 Highest-Paying Dividend Stocks in the TSX?

Investors hunting for passive income on the TSX often find themselves circling back to two of the highest-yielding blue-chip names in Canada. Those are Fairfax Financial (TSX:FFH) and Canadian Tire (TSX:CTC.A). These are not just dividend stocks but income powerhouses. But with big income comes big questions: is the dividend safe, and more importantly, is now the right time to buy?

FFH

Fairfax Financial is in a class of its own. The Canadian stock recently reported net earnings of over $1.4 billion for the second quarter of 2025, driven by strong underwriting profit, massive gains on equity investments, and solid interest and dividend income from its investment portfolio. Fairfax has long followed a value-oriented approach under the guidance of legendary CEO Prem Watsa, and it’s paying off in spades this year.

The insurer’s combined ratio remains healthy at 93.3%, and adjusted operating income from its property and casualty business came in at a robust $1.13 billion. Perhaps most importantly for income investors, Fairfax declared a hefty $21.59 per share annual dividend. That puts the yield just under 1%. This may not seem sky-high at first glance, but it’s the size and consistency of the payout that stands out. Fairfax’s dividend has become more generous in recent years thanks to soaring earnings, and with a payout ratio under 10%, there’s ample room for future increases.

Fairfax carries its own complexities. Its investment performance can be volatile from quarter to quarter, especially with heavy exposure to equities and derivatives. However, the sheer size of its balance sheet, with over $70 billion in portfolio assets, and its nimble capital allocation have made it one of the more reliable compounders in Canadian markets. Its book value per share has climbed nearly 11% this year, even after adjusting for a massive dividend payout in the first quarter.

CTC

Canadian Tire, meanwhile, takes a different route to income generation. The Canadian stock has built a sprawling retail empire that touches nearly every corner of Canadian life, from tires to patio furniture to hockey sticks, and its dividend reflects its national dominance. At $7.10 per share annually, the yield currently sits above 4.2%, one of the highest among large Canadian consumer-facing stocks. Unlike Fairfax, which operates in the more complex world of global insurance and investing, Canadian Tire offers a straightforward play on Canadian retail resilience. And despite macroeconomic headwinds, it’s holding up remarkably well.

In the most recent quarter, comparable sales rose 5.6%, led by strength in seasonal goods, gardening, and automotive products. The Canadian stock also continued executing on its True North strategy, refreshing dozens of stores, expanding its loyalty program, and acquiring iconic brands from Hudson’s Bay Company. Adjusted earnings per share (EPS) came in at $3.57, slightly down year over year. Yet management made it clear that investments in tech and digital infrastructure will weigh on short-term results as they reposition for long-term growth.

One key risk for Canadian Tire lies in its debt profile. Total debt now sits above $10 billion, with a debt-to-equity ratio over 150%. That leverage makes the Canadian stock more sensitive to interest rates and economic slowdowns, especially as consumers tighten their wallets. However, free cash flow remains solid, and the Canadian stock repurchased more than $250 million in shares so far this year, suggesting confidence in the business’s long-term trajectory.

Bottom line

So, what’s the takeaway for dividend investors? Canadian Tire offers immediate income with a higher yield and the comfort of a well-known brand. Fairfax delivers a lower current yield but arguably more upside through its earnings power and capital efficiency. If you’re looking for stability and yield today, Canadian Tire is the more conventional pick. If you’re aiming for growth-driven income with a contrarian edge, Fairfax might just be your stock. Together, $10,000 towards each stock could bring in annual dividends of $504 at writing!

Either way, these two Canadian stocks anchor the top of the TSX dividend ladder for a reason. Just make sure you understand what you’re buying, because while both pay handsomely, each takes very different roads to get there.