Canada is rich in dividend stocks. Canadian investors can earn stable streams of dividend income from a diverse mix of sectors and industries. Given that interest rates have moderated in a stable range (and are not set to rise, at least for now), investors have felt more confident about putting more capital to work in Canada’s top dividend stocks.
However, dividend yields have declined and valuations are looking a little elevated for many of these top dividend stocks. Sectors like real estate, banking, energy, and infrastructure have all seen strong momentum in 2026.
Investors may be wise to wait for a reasonable pullback before committing to a new, full position. Here are two stocks I would be happy to add if they see a decent pullback in the coming months.
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Royal Bank of Canada: A top bank for dividends
Royal Bank of Canada (TSX: RY) has really delivered for Canadian shareholders. Its stock is up 17% year to date and 57% over the past year. Over the past five years, shareholders would have earned a 121% gain!
No doubt, Royal Bank is one of the best banks in Canada. Not only is it the largest bank in Canada, but it has consistently delivered market-leading results.
While its stock is up 127%, earnings per share have only increased by 96% in that time (still pretty impressive). Its price-to-earnings (P/E) ratio increased from 12.8 to 17.9 today. Its 10-year average P/E ratio is closer to 13.
Royal Bank is an exceptionally well-run business and will likely continue to be Canada’s top bank for many years to come. Likewise, it has a great record of consistently raising its dividend alongside earnings. Yet, its dividend yield is only 2.6% today. Its 10-year average is closer to 3.7%.
Bank results are highly correlated to the economy. If cracks start forming in the economy, you may want to wait for a decent pullback before adding the stock again. There is very little margin for error at the current valuation. Even though it is a top bank in Canada, it is one stock I would much rather add on a substantial pullback.
Canadian Natural Resources: A top energy stock to buy on a pullback
Like Royal Bank, Canadian Natural Resources (TSX: CNQ) is a GOAT (greatest of all time) in the energy sector. With a market cap of $132 billion, it is the largest energy stock. It also happens to be one of the best run energy companies in Canada.
Its stock is up 37% year to date and 44% in the past year. Over the past five years, shareholders are up 190%!
The energy producer can support its dividend and maintenance capital at around $45 per barrel. With oil prices above $90 per barrel, it is generating a huge windfall of cash flow.
However, Canadian Natural is an energy stock. These stocks tend to move in lock step with the price of oil. Even if it can generate substantial free cash returns in an $70 to $80 per barrel environment, the market will likely sell the stock if oil prices moderate.
I would take that pullback as a great time to add the stock with a higher yield. It’s a great company, but its valuation is just a tad stretched. Dividend investors are likely to get Canadian Natural at a better price in the coming few months.
