TOP CANADIAN STOCKS TO BUY FOR DIVIDEND GROWTH

Dividend-growth stocks are having a moment in Canada, and it’s easy to see why. With inflation still sticking around and interest rates showing few signs of coming down fast, many investors are focusing on stability and income. That’s where dividend stocks shine, especially those with a history of consistent growth. And when you add in long-term share growth, it becomes even more appealing.

Among the many choices on the TSX, three names continue to stand out: Bank of Montreal (TSX:BMO), Canadian Utilities (TSX:CU), and Manulife Financial (TSX:MFC). Each offers a different kind of exposure to the Canadian economy, but all three have something in common: decades of stable dividend payments and room to grow from here.

BMO

Let’s start with BMO. This bank doesn’t usually make headlines for flashy moves, but what it does offer is consistent performance. In its first quarter of 2025, BMO reported net income of $2.14 billion, up sharply from $1.73 billion the year before. Earnings per share (EPS) hit $2.83, while adjusted EPS came in even stronger at $3.04. That’s a solid beat, thanks to strength across all business lines, especially in wealth management and capital markets. The bank’s common equity tier-one (CET1) ratio is now at 13.6%, one of the strongest capital buffers among Canadian banks. It supports the bank’s growing dividend, which now sits at $1.59 per quarter. That’s $6.36 annually, and with a yield of around 5.2% at recent prices, it’s not hard to see why investors are holding tight.

BMO also benefits from its international diversification. Its U.S. operations, particularly after acquiring Bank of the West, offer exposure to one of the world’s most dynamic financial markets. So, while the Canadian economy might be growing slowly, BMO is positioned to capture more upside elsewhere, all while paying you handsomely along the way.

CU

Then there’s Canadian Utilities, perhaps the most quietly impressive dividend stock on the entire TSX. CU is one of only two companies to have raised its dividend for more than 50 consecutive years. That alone puts it in elite territory. In the first quarter (Q1) of 2025, CU delivered adjusted earnings of $232 million, up from $225 million last year. It posted $0.85 per share in earnings and generated $637 million in cash from operations. That’s plenty of financial firepower to support its annual dividend of $1.83 per share, paid quarterly at $0.4577.

CU’s business is based largely on regulated electricity and natural gas distribution. These aren’t exciting sectors, but that’s kind of the point. Whether the economy is booming or slowing down, people need power and heat. CU has committed to investing $5.8 billion in regulated utilities and energy infrastructure over the next three years. This planned investment supports both grid modernization and stable earnings, which helps back future dividend increases.

MFC

Finally, there’s Manulife Financial. Often overlooked in favour of flashier tech or energy names, Manulife has grown into one of the most reliable income generators on the TSX. It currently pays a quarterly dividend of $0.3094 per share, or $1.24 annually. At today’s share price, that works out to a yield of just under 4%. That’s not the highest you’ll find, but what makes it shine is the growth behind it.

Manulife is a global insurance and financial services company with operations across Canada, the U.S., and Asia. This diversification gives it exposure to faster-growing economies while maintaining a strong Canadian core. Analysts are projecting Q1 2025 earnings at $0.74 per share, which suggests stable margins and continued profitability. What’s especially promising is its push into digital services and wealth management, which are expected to grow at a faster clip than traditional insurance over the next decade. The company has consistently improved its return on equity and free cash flow — two key metrics that support future dividend growth.

Bottom line

All three of these dividend stocks earned spots in long-term portfolios. But when held inside a Tax-Free Savings Account (TFSA), the benefits grow even faster. No tax on the dividends. No tax on capital gains. Just clean, compounding income you can use in retirement or reinvest along the way. That’s the kind of strategy that rewards patience and a little faith in Canadian dividend stocks doing what they do best.

The post Top Canadian Stocks to Buy for Dividend Growth appeared first on The Motley Fool Canada.

More reading

• TFSA: 3 Canadian Stocks to Buy and Hold for Life
• How I’d Turn $5,000 Into a Passive Income Stream This Year
• RRSP Wealth: 2 Stocks to Buy on the Pullback
• Top Canadian Value Stocks I’d Consider for My TFSA Growth Strategy
• Got $5,000? How I’d Allocate it Across 5 Financial Stocks for Lasting Sector Exposure

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2025-05-09T20:29:45Z