Top 10 Canadian dividend stocks, ranked by income quality

Only Canadian-registered operating companies on the Toronto Stock Exchange that actually pay are considered: dividends in at least three different calendar years within the last five years, and a trailing twelve-month yield between 1% and 12%. That leaves 155 companies out of 212 payers we can measure. Each one is scored on four things: the income lens (40%), which blends the yield and the length of the payment record against every share on the exchange; the risk lens (25%), which rewards a steady price; trading volume (20%); and trend (15%).

Income carries the most weight because this is a dividend list, but 60% of the score asks whether the share price has held up and the shares are easy to trade. That is deliberate: a high yield on a falling price is how a dividend cut often looks in advance, and the yield alone cannot tell a generous payer from a company the market has stopped believing.

Of the 155 eligible companies, 116 paid quarterly over the last twelve months, 33 paid monthly and 3 paid once or twice. Quarterly is the habit of most large Canadian companies, including the banks and utilities; monthly payments are common among real estate investment trusts, income trusts and some energy producers that distribute cash flow.

The yield on this page adds up every payment whose ex-dividend date fell in the last twelve months and divides it by today's price, so the payment schedule shapes how fast the figure reacts. A monthly payer that cuts its distribution changes the trailing yield a little each month for a year, while a quarterly payer changes it in four steps. A cut can therefore sit in a trailing yield for months before it shows fully, which is another reason the list weighs the steadiness of the share price alongside the yield. Special dividends are included.

The typical eligible company yields 3.05%. 41 companies yield at least one and a half times that, and 10 of them have a trend lens below 40, meaning their price has been weaker than most Toronto shares. Most of the highest yields therefore come with a price that has held up, so a high yield on this market is not automatically a warning sign; the minority with a weak trend are the ones to read the company's latest results for.

Among the 155 eligible companies the highest trailing yield belongs to Telus Corp (T) at 11.7%. It ranks 42 on this list, because its trend lens is 17 and its risk lens 55, both out of 100. 5 Canadian payers yield more than 12% and are left out altogether: at that level the cause is usually a one-off special payment or a share price that has already collapsed, and either way the figure is a poor guide to what you would receive next year.

Real estate investment trusts and income trusts are ranked like other operating companies when they pass the filters. They are built to distribute most of their cash flow, so their yields are high by design and say less about generosity than they would for a bank or a utility, and part of a trust's distribution can be a return of capital rather than income. The yield here counts every cash distribution and cannot separate the two. Today 2 of the ten are trust units (tickers ending -UN).

The figure shown is before tax. For Canadian residents, dividends from Canadian corporations can qualify for a dividend tax credit when held in an ordinary account, while the same shares held in a Tax-Free Savings Account or a registered retirement account are treated differently again, and a trust's distribution can be taxed partly as income and partly as a return of capital. Non-residents normally have Canadian withholding tax deducted, at a rate set by the tax treaty between Canada and their home country. Check the current rules with the Canada Revenue Agency or a tax adviser before comparing a yield here with what you would actually keep.

The typical eligible company yields 3.05%, and the typical company in the top ten 4.70%. The top ten yields more than the typical payer, but by less than a pure yield ranking would, which is the price of the steadiness rule: the list leans toward above-average yields on shares that have behaved, not the largest yields on offer. The Canadian Top 10 by price-based X-Ray score ranks the same companies without regard to income.