Dividend investing is undoubtedly one of the best ways to put your hard-earned money back to work for you. When you buy high-quality Canadian dividend stocks that pay attractive and, in many cases, consistently growing dividends each year, not only do you help lower the risk of your investments, but you also give yourself the opportunity to compound returns over time.
That’s why some stocks are better suited for dividend investors than others. Whether they operate in stable industries, have predictable revenue, are more established so they don’t need to reinvest every dollar back into the business for growth, or operate as royalty-style businesses, many companies have structures that make them ideal for dividend investors.
Dividend stocks can also play an important role in building long-term wealth because the income helps smooth out volatility and keep returns more consistent through different market environments.
So, with that in mind, here are five stocks that are particularly well-suited for Canadian dividend investors today.
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Two top Canadian stocks built for dividend investors
If you’re a dividend investor looking for high-yield stocks that were made for passive income seekers, two of the best picks on the TSX today are Alaris Equity Partners Income Trust (TSX:AD.UN) and Diversified Royalty (TSX:DIV).
Alaris is intriguing because it provides capital to private businesses, often through preferred equity or structured investments, and earns cash distributions in return.
That model is what makes it attractive for dividend investors because it’s built to consistently generate income from a diversified portfolio of partner companies instead of relying on one operating business.
Furthermore, the fact that it offers a compelling yield of roughly 6.7% is another reason why it’s one of the top Canadian stocks that dividend investors can buy.
Meanwhile, Diversified Royalty is similar in the sense that it invests in partner businesses and is designed around collecting cash and paying almost all of it out.
The stock earns royalty income from a portfolio of different companies, making it an ideal stock to buy for passive income seekers. It also offers a sky-high yield of more than 7.2%, making it one of the most compelling Canadian dividend stocks on the TSX.
Two top Canadian pure-play royalty stocks
Royalty stocks are some of the best dividend stocks to own because the business model is straightforward. Instead of dealing with the headaches of operating businesses, royalty companies almost always have asset-light business models designed to collect and payout a large portion of earnings.
And while Diversified Royalty earned royalty streams from a portfolio of different brands, two pureplay stocks to consider on the TSX are Freehold Royalties (TSX:FRU) and Pizza Pizza Royalty (TSX:PZA).
Freehold owns royalty interests in oil and gas properties across North America. It doesn’t spend heavily on capital projects the way producers do, because it’s not the operator.
Instead, by simply owning the land, it can generate strong free cash flow, which is why it’s often viewed as one of the better dividend options in the energy space.
Furthermore, because it aims to pay out only about 60% of its cash flow, it ensures the dividend remains sustainable. And right now that dividend has a yield of roughly 6.4%.
Pizza Pizza, meanwhile, earns a royalty from sales at every Pizza Pizza and Pizza 73 location across the country.
And because same-store sales hardly fluctuate much year over year, its revenue and cash flow are highly predictable, making it an ideal dividend stock offering a current yield of 5.8%.
A high-quality REIT that’s ideal for dividend investors
REITs are one of the best sectors for dividend investors, and one of the very best picks Canadians can consider today is CT REIT (TSX:CRT.UN).
CT REIT is a retail REIT that has increased its revenue, funds from operations, and dividend every year since going public over a decade ago.
Because it leases most of its properties to Canadian Tire, which is also its majority owner, it’s an incredibly reliable investment.
Its occupancy stays high, cash flow stays predictable, and many leases include built-in rent escalators.
So, if you’re looking for a top dividend stock to buy in the real estate sector, CT REIT is incredibly reliable and offers a yield of roughly 5.8% today.
