Top Canadian dividend stocks are known for their steady payouts, even during a difficult operating environment. Moreover, a few of these Canadian dividend stocks have solid growth prospects, with significant room to run over time, driven by durable demand trends.
Against this background, here are three TSX stocks known for reliable dividends and room to grow. These dividend stocks are backed by solid fundamentals, steady earnings growth, and sustainable payout ratios.
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Dividend stock #1: Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is a top stock offering a reliable dividend and has ample room to run in the long run. This oil and gas producer’s payouts have remained resilient through commodity cycles, thanks to its high-quality assets and disciplined capital allocation strategy. Notably, Canadian Natural has consistently increased its dividend at a compound annual growth rate (CAGR) of 20% in the last 26 consecutive years.
In addition, this top dividend payer has delivered exceptional capital gains. For instance, CNQ stock has surged by more than 55% over the past year, outperforming the broader market. Moreover, in the last five years, CNQ stock has generated total capital gains of over 308%.
Looking ahead, CNQ is well-positioned to continue growing its dividend. Its strong cash flow, rising production, robust free cash flow generation, ongoing cost-optimization efforts, and expanding reserves augur well for continued earnings growth. Meanwhile, CNQ’s diversified portfolio, long-life, low-decline assets, and extensive undeveloped land holdings provide a solid base for sustained growth and future dividend increases.
Dividend stock #2: Bank of Montreal
Bank of Montreal (TSX: BMO) is another compelling stock with one of the most impressive dividend payment histories and steady growth. The Canadian financial services giant has consistently paid dividends for 197 years. This payout history shows the resilience of its earnings. Further, BMO has raised its dividend at a CAGR of 5.7% over the past 15 years.
BMO’s diversified revenue base, focus on improving operating efficiency, solid credit quality, and a strong balance sheet, will continue to drive its earnings and dividend payments. BMO has also been expanding its footprint in high-growth markets, which should support its financials. At the same time, ongoing investments in technology and artificial intelligence (AI) will boost efficiency.
Shares of this Canadian banking leader have risen about 69% over the past year, reflecting solid operating momentum. By streamlining costs and deepening client relationships, earnings could grow further, supporting BMO’s capacity to sustain and increase its dividend over time.
Dividend stock #3: Hydro One
Hydro One (TSX: H) is an attractive dividend stock, offering steady income, stability, and growth. The company is one of the largest electricity transmission and distribution companies in Canada. Also, it has no exposure to fluctuating commodity prices or the risks associated with generation assets, which makes its business more predictable. Since it operates a regulated utility business, it delivers stable earnings and growing cash flows to support consistent dividend payments.
For instance, between 2016 and 2022, the company increased its dividend by approximately 5% annually, with growth accelerating to roughly 6% in recent years. Hydro One’s payouts are driven by its growing rate base.
Looking ahead, management expects the rate base to grow at about 6% annually through 2027. This should translate into 6–8% annual earnings growth and 6% annual dividend growth.
Hydro One stock has grown at a 17% CAGR over the last five years and has significant upside. Its solid balance sheet and ability to fund its growth initiatives through internally generated cash flow limit reliance on external financing. At the same time, Hydro One continues to invest in upgrading and expanding its infrastructure. As electricity demand gradually increases and the grid modernizes, these investments can support steady earnings growth, driving its dividend and share price.
