Canada has a wide variety of dividend stocks for investors to choose from. Yet not all dividend stocks are created equal. There are plenty of stocks with elevated dividend yields but weak or declining businesses. As a result, investors need to be particularly choosy.
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The best dividend stocks deliver income and capital growth over time
The best dividend stocks are those that can raise their dividend in lockstep with their earnings and cash flow growth. As earnings grow, their stocks are more likely to grow as well. Consequently, investors get both capital appreciation and dividend appreciation.
Their total returns tend to be far superior to those stocks that just pay a large dividend. With these stocks, you have a way better chance of collecting a great income stream and beating the TSX Index.
Exchange Income is a cash-gushing dividend payer
One Canadian dividend stock that has been particularly impressive as of late is Exchange Income Corporation (TSX: EIF). This stock trades for $77.50 today and has a market cap of $4.2 billion. Its stock is up 40% in 2025, 142% in the past five years, and 220% in the past 10 years.
Exchange operates a diverse mix of essential services businesses. Its largest segment is aerospace and aviation. Around 70% of sales and 81% of earnings before interest, tax, depreciation, and amortization (EBITDA) come from this segment.
It offers specialized airlines and air services to remote communities in northern Canada. It also has strong aviation defence offerings and an aircraft leasing/sales business. With Canada increasingly focused on defence and protecting Arctic sovereignty, Exchange is well-positioned both in commercial and defence aspects.
Its manufacturing segment makes up about 30% of sales and 19% of EBITDA. These are very niche businesses that include specialized manufacturing, window panels, and environmental mats. Its window business is slow right now, but its mats business is operating full steam ahead, given all the infrastructure spending across North America.
That is the benefit of a diversified business focused on niches. When one segment underperforms, the other is generally performing very well.
Strong results have propelled this dividend stock in 2025
Exchange has been very acquisitive. It can grow through a mix of different economic environments. This year, Exchange added Canadian North Airlines to its portfolio. While it is not immediately accretive, it is expected to meet its hurdle return rate in a year or two.
For the first nine months of 2025, Exchange’s sales are up 19% to $2.34 billion. Adjusted EBITDA and adjusted net earnings per share are both up 17% in that time. The company is already expecting another robust year in 2026. It anticipates adjusted EBITDA will increase by between 13.7% and 14.4%. That is contemplating no additional acquisitions or new contracts in 2026 either.
This company has been a great dividend stock. It has increased its dividend 18 times in the past 21 years. In its third quarter, it increased its annual dividend by 5%. Its dividend is well supported by cash flows. It only has a payout ratio of 63% based on free cash flow after maintenance capex.
Today, Exchange stock yields 3.6%. It pays its $0.23 per share dividend on a monthly basis, so it’s an attractive stock for those wanting monthly income.
The Foolish takeaway
For investors looking for income and growth, Exchange is an intriguing stock today. While this dividend stock is up considerably in 2025, its valuation of 18 times earnings is reasonable, especially if it can achieve the high end of its 2026 outlook assumptions.
