Canadians are lucky to have such a wide selection of dividend stocks that generate attractive streams of passive income. However, you do have to be choosy. Just because a stock has an attractive dividend yield doesn’t mean it will be a good investment.
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Why you need to be choosy when picking dividend stocks
Allied Properties REIT (TSX: AP.UN) has been adamant about maintaining its dividend, even though its cash flows have long been insufficient to maintain it. Its stock has declined 67% in the past five years. It was yielding over 13% last week. It finally announced a day ago that it would cut its dividend by 60% to get to a more sustainable level.
All around, it was a smart decision. However, management’s obstinacy about dividends has been a long-term detriment to shareholders. You don’t want to make that mistake.
It is smarter to find Canadian dividend stocks with smaller yields that are sustainable, and hopefully growing. If you are wondering what Canadian dividend stocks are worth owning, here are two to consider adding in 2026.
A top Canadian utility stock
With only a 3.5% dividend yield, Fortis (TSX: FTS) is trading at a premium valuation today. Yet, it garners high investor demand for its low-risk business and steady/stable stock performance.
This is a perfect stock to just tuck away and collect a predictable stream of income. What’s more predictable than 52 years of consecutive annual dividend increases?
Fortis is the safest of safe utilities. It has a very modest balance sheet and is prudently managed. 99% of its business is regulated. While that caps its growth to an extent, it also caps its risk.
Yet, its growth is nothing to balk at. Fortis is investing $28.8 billion into its utilities over the coming five years. It is expected that this will translate to 7% annual rate-based growth over that period. This should support mid-single-digit annual dividend growth in the years ahead.
2026 is no doubt going to be another volatile year in the market. Fortis is a great Canadian portfolio anchor stock to hold through any potential storm to come.
A leading Canadian bank stock
With a market cap of $300 billion, Royal Bank of Canada (TSX: RY) is the largest stock in Canada. It also happens to be one of its best banks and best dividend stocks. This bank has a nearly 30-year record of growing its dividend by a low-teens growth rate.
Like Fortis, Royal is not cheap. After its stock has risen 26% this year, it is trading near an all-time high valuation. Likewise, its 2.8% dividend yield is near a multi-decade low.
Yet, Royal gets a premium for just being one of the best banks in North America. It has avoided the costly mistakes other Canadian banks have made to pursue aggressive growth. It has been able to win market share from its peers over the past few years.
I wouldn’t buy Royal immediately here. However, if there is a pullback in bank stocks in 2026, I would make it a definite add. It’s a great business with a great growing dividend.
The Foolish bottom line
Don’t waste your time on dividend stocks with outsized yields and unsustainable dividends. Sometimes, it’s best to pay up a bit and own quality stocks like Fortis and Royal that last the test of time.
