Dividend stocks can be excellent additions to a portfolio, offering investors the potential for both consistent income and long-term capital appreciation. Companies that pay dividends typically operate well-established businesses with reliable cash flows, enabling them to maintain steady payouts over time. Thanks to their stable business models and dependable earnings, these stocks are often less sensitive to economic cycles and market volatility, helping investors generate more consistent and predictable returns.
Against this backdrop, let’s look at two Canadian dividend stocks that continue to trade at reasonable valuations, even as Canadian equity markets have rebounded strongly from their March lows and now trade near all-time highs.
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Bank of Nova Scotia
First on my list is the Bank of Nova Scotia (TSX:BNS), one of Canada’s leading financial institutions with operations across multiple countries. The bank benefits from diversified revenue streams and a broad international presence, which helps reduce the impact of market volatility, economic cycles, and macroeconomic pressures on its overall financial performance. Supported by its resilient business model and stable cash flows, BNS has paid dividends continuously since 1833 and has increased its dividend at an annualized rate of 4.7% over the last decade. Its forward dividend yield also looks reasonable at 4%.
Meanwhile, BNS is sharpening its strategic focus by expanding its lower-risk, highly profitable North American operations while gradually reducing its exposure to riskier Latin American markets. This transition could enhance earnings stability and improve the consistency of its cash flows over the long term. In addition, persistent inflation may encourage central banks to delay interest rate cuts, which could support the bank’s lending business by helping maintain healthy net interest margins (NIMs) in the coming quarters.
BNS is also enhancing shareholder returns through its recently announced share repurchase program, which authorizes the buyback of up to 15 million shares over the next 12 months. By April 2027, this initiative could reduce its outstanding share count by approximately 1.2%. Given its stable business model, healthy dividend yield, and improving operational focus, I believe BNS remains well-positioned to continue rewarding shareholders over the long run.
Meanwhile, the stock has generated an impressive total shareholder return of 61.9% over the last 12 months, outperforming the broader equity markets. Despite this strong rally, BNS still trades at a reasonable next-12-month price-to-earnings multiple of 13.1, making it an attractive investment opportunity for long-term investors.
Northland Power
Another dividend stock that continues to trade at a reasonable valuation is Northland Power (TSX:NPI), a renewable energy company with a diversified portfolio of power-generating assets and an economic interest in approximately 3.5 gigawatts of capacity. The company sells most of its electricity under long-term power purchase agreements (PPAs), which account for roughly 95% of its revenue. This highly contracted business model provides stable, predictable cash flows, enabling Northland Power to pay reliable monthly dividends to shareholders. The company’s current monthly payout of $0.06 per share yields 3.1% on a forward basis.
Meanwhile, the global transition toward cleaner energy continues to create significant long-term growth opportunities for Northland Power. To capitalize on this favourable trend, the company plans to invest between $5.8 billion and $6.6 billion over the next five years to expand its renewable energy portfolio. Supported by these investments, management expects its power-generating capacity to increase to 7 gigawatts by the end of the decade, representing an impressive annualized growth rate of 16%.
In addition to expanding its operations, the company is working to improve efficiency and optimize costs. These initiatives could generate approximately $50 million in annual cost savings beginning in 2028. Together, these growth and efficiency measures could strengthen Northland Power’s earnings profile and further enhance the sustainability of its dividend payments over the long term.
Northland Power stock has also delivered strong market performance this year, generating an impressive total shareholder return of 31.7% year to date. Despite the rally, the company still trades at a reasonable valuation, with next-12-month price-to-sales and price-to-earnings multiples of 2.3 and 16, respectively, making it an attractive option for long-term dividend investors.
