With the Bank of Canada having lowered its benchmark interest rate nine times since June 2024, bringing it down to 2.25%, investors may want to accumulate dividend-paying stocks to enhance their passive income. However, dividends are never guaranteed, making careful stock selection essential. Investors should focus on quality companies with strong underlying businesses, reliable cash flows, consistent dividend growth, and attractive yields. Against this backdrop, here are my three top dividend stock picks.
Enbridge
Enbridge (TSX:ENB) stands out as one of the top Canadian dividend stocks for generating reliable passive income, supported by stable cash flows from long-term contracted businesses, solid growth prospects, and an attractive yield. The company operates a diversified asset base of more than 200 assets. It generates approximately 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from regulated assets and long-term take-or-pay contracts. As a result, Enbridge has minimal exposure to commodity price fluctuations, while roughly 80% of its adjusted EBITDA is inflation-indexed, providing an effective hedge against rising prices.
Backed by these stable and predictable cash flows, Enbridge has paid dividends for more than 70 years and increased its dividend for 31 consecutive years. The stock currently offers a compelling forward dividend yield of around 6%.
Looking ahead, Enbridge is advancing a $37 billion secured capital program and plans to invest $9–$10 billion annually to support these projects, most of which could come online through 2029. These investments should drive steady earnings and cash flow growth. Supported by this outlook, management expects to reward its shareholders by returning $40–$45 billion over the next five years, reinforcing the sustainability and growth potential of its dividend.
Canadian Natural Resources
Another Canadian stock that stands out for income-seeking investors is Canadian Natural Resources (TSX:CNQ). The company has grown its dividend at a compound annual growth rate of 21% over the past 25 years, underscoring the strength and consistency of its shareholder returns. CNQ operates a diversified and balanced asset base, supported by low-risk, high-quality reserves that require relatively low capital reinvestment. Combined with efficient operations and disciplined, flexible capital allocation, these advantages generate strong and sustainable cash flows, enabling the company to grow its dividend consistently. The stock currently offers an attractive forward dividend yield of approximately 4.9%.
CNQ also boasts roughly five billion barrels of oil equivalent in reserves and a proven reserve life index of about 32 years, providing excellent long-term production visibility and underpinning durable cash generation. To further strengthen its production capabilities, the company plans to invest $6.7 billion in 2025 and $6.4 billion in 2026. Supported by these investments, management expects average production this year to range between 1,590 and 1,650 thousand barrels of oil equivalent per day (MBOE/d), with the midpoint implying a 3.2% year-over-year increase.
Given its high-quality reserves, disciplined capital allocation, expanding production profile, and robust free cash flow generation, CNQ is well-positioned to sustain dividend growth over the long term, making it a compelling choice for income-focused investors.
Bank of Nova Scotia
My final pick is the Bank of Nova Scotia (TSX:BNS), a long-standing dividend payer that has distributed dividends uninterrupted since 1833. Supported by a diversified revenue base, the bank generates stable and reliable cash flows, enabling it to maintain and steadily grow its dividend. Over the past decade, Scotiabank has increased its dividend at a compound annual rate of 4.7% and currently offers a forward dividend yield of approximately 4.3%.
The bank’s financial performance has also been improving, as evidenced by its recently reported fourth-quarter results, which showed revenue growth of 15% and adjusted earnings per share growth of 22.9%. In addition, Scotiabank has strengthened its balance sheet and improved its loan-to-deposit ratio, positioning it well to support sustainable long-term growth.
Looking ahead, management is prioritizing expansion in lower-risk North American markets while scaling back less profitable or higher-risk operations in Latin America. This strategic shift should help streamline operations, improve overall profitability, and enhance the sustainability of future dividend payouts, reinforcing Scotiabank’s appeal for income-focused investors.
