Top Canadian dividend stocks can help you build a sustainable passive income stream. Notably, many of Canada’s leading dividend payers have uninterruptedly increased their distributions year after year, making them worry-free holdings for investors seeking regular cash.
However, there’s one challenge. The recent rally in many of these blue-chip dividend stocks has pushed their share prices significantly higher, leaving dividend yields less compelling than they were just a few months ago.
Since dividend yields decline as share prices rise, paying too much for even the highest-quality dividend stocks can reduce your income potential. That’s why investors should wait for a dip. Buying solid dividend stocks during temporary dips can lock in a higher yield and also improve long-term return potential.
Within this context, here are two top Canadian dividend stocks to snap up on a dip.
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Top Canadian dividend stock #1: Toronto-Dominion Bank
Toronto-Dominion Bank (TSX: TD) is one of the most attractive Canadian dividend stocks to buy on a dip. Shares of this financial services giant have gained over 72% in a year, reflecting its solid operating performance. In addition, this leading Canadian bank continues to pay and increase its dividend year after year.
TD’s payouts are supported by its diversified revenue base, which helps cushion earnings during economic slowdowns while positioning the bank to benefit as lending activity and business conditions improve. Meanwhile, steady growth in loans and deposits highlights the strength of its core banking franchise.
The bank’s dividend payment history remains attractive. TD has paid dividends for more than 169 years and recently increased its quarterly payout by 4% to $1.12 per share. TD has grown its dividend at an average annual rate of about 8% over the past decade, reflecting its focus on enhancing shareholder value.
Importantly, TD’s dividend growth streak remains sustainable. With a payout ratio of roughly 40% to 50%, TD retains sufficient financial flexibility to keep raising dividends while investing in growth.
TD’s first half performance was solid, supported by broad-based business momentum, margin expansion, cost-efficiency initiatives, and healthy volume growth in Canadian Personal and Commercial Banking.
Looking ahead, TD is well-positioned to deliver steady earnings growth, supported by a high-quality loan portfolio, diversified operations, and operational efficiency. Its solid financial performance, proven track record of dividend growth, and a sustainable payout ratio make TD an attractive choice for investors seeking dependable income.
Top Canadian dividend stock #2: Fortis
Fortis (TSX: FTS) is a must-buy dividend stock on a dip. Shares of this utility company have gained about 25% over the past year, and the uptrend will likely continue, driven by rising electricity demand. In addition, Fortis continues to reward its shareholders with consistent dividend payments and growth.
Fortis generates its earnings from regulated electricity and natural gas transmission and distribution operations. Since regulated utilities operate under approved rate structures, their revenues and cash flows remain predictable, regardless of commodity price fluctuations or broader economic uncertainty. This defensive profile has enabled Fortis to consistently generate stable earnings through different market cycles, supporting its payouts.
Fortis’s growing rate base and sustainable payouts have helped the company to increase its dividend for 52 consecutive years.
Fortis is executing a $28.8 billion capital plan to expand and modernize its regulated utility infrastructure. These investments are expected to increase its regulated rate base and enable Fortis to hike its annual dividend by 4–6%. In addition, Fortis is likely to benefit from rising electricity demand, which will help cushion its earnings and payouts.
Overall, Fortis is a compelling stock to accumulate on a dip for stress-free dividend income.
