Canadian Dividend Stock Selection Made Easy

Yes, I think the title says it all.  Contrary to what some people might have you believe, I think selecting a few quality Canadian dividend-paying stocks can be easy.   Again, a few.  In fact, the answer to selecting a couple of great Canadian dividend-paying stocks to start your direct ownership portfolio might be staring you right in the face, especially if you own some certain big bank mutual funds.

Don’t believe me?  Let me show you.

Have a peek at the following screenshots, in no particular order, and tell me what trends you see?

Fund # 1 – BMO Dividend Fund

Fund # 2 – CIBC Dividend Growth Fund

Fund # 3 – RBC Canadian Dividend Fund

Fund # 4 – Scotia Canadian Dividend Fund

Fund # 5 – TD Dividend Growth Fund

What are your first impressions when you see the holdings of these funds?

With the exception of one dividend fund out of five, have you noticed anything particularly interesting about their top-10 holdings?  Do they look similar?  I look forward to your comments!

32 Responses to "Canadian Dividend Stock Selection Made Easy"

  1. I figured this out long time ago. For my wife’s taxable account she has TD,Telus,Enb,Emera and ZLB for low volatility CDN market with a 2.5% div

    For my taxable account I have BMO,BCE,TRP,FTS

    This covers banks, utilities,Telco,Pipelines

    HAving all the banks or all Telco or all Pipelines will not improve your portfolio. keep simple

    DRIP the hell out of it.

  2. Certainly a good starting point, but there are cyclicals in the list. I still like the DRIP\SPP and dividend history screening. Only seven of my 11 and 5 of our 7 are on the above top 10’s. No utility companies listed.

  3. Newly signed up with MOA and enjoying! Question- Its easy enough to find the best blue chip dividend paying stocks in Canada, the question is when to buy them. Can you or anyone suggest a site where I could find or be alerted when one of these stocks fall “out of favour” or price dips to buy levels?

    1. Thanks for reading Chuck! Tell others to visit as well 🙂

      I think you’re right, it’s easy enough at least in Canada to spot the established dividend paying stocks. The biggest question is when to buy them. The best answer is at low prices.

      Right, easy to say. Hard to do and predict. Personally I like buying my stocks around 52-week lows. I don’t really have a magic formula and even if I did I’m at the mercy of what the markets may or may not do.

      You can set-up price alerts for stocks using a number of sites. TMX money is one and should be free:

      Good luck with your investing journey Chuck and thanks for being a fan of the site.

  4. I was already sold on the large Canadian banks. This just got me even more juiced about owning TD, BNS and RY in my ROTH. Great, simple post that speaks volumes!

  5. Seems (and those are old snapshots so the percentages might have changed slightly, same with the rankings) that most of those ‘dividend’ funds top ten holdings average 40-60% of the entire fund. If you were to pick out 5-10 of the top 5-10 average top holdings across the board, maybe even get the consensus top 10, there is a diminished need to have a Canadian equity etf or fund as it doubles down on some of your holdings. I’m not arguing against holding individual stocks and an ETF/Fund that also holds that same stock as a percentage of its holdings, but rather am asking is there a Canadian ETF that maybe compliments instead, so you’re not completely doubling up (both potential risk and/or gain)? I understand most of the Canadian equity etfs and funds cover 50/60-240+ stocks/companies so there is that going for it! (I currently have the TD E-series big four, though I’m considering dropping the bonds for now and going back to it later, as I started investing late [33 years age started, almost 34 at the time I made my first purchases], I also have a lot of company stock in CNR and a bit of ZRE and ENB).

    I’m figuring on continuing to build my e-series (or convert it to ETFs at Questrade) and over time by shares of individual stocks with dividends (safe blue chip stocks) to compliment monthly income and let it DRIP (seems unfortunate that both Questrade and TD do do DRIPs but only whole shares – a nice perk of my company holding for my CN stock that they purchase partial shares).

    1. Yes, some old screenshots Greg. I need to update that post and issue another one. Sure, a railroad and Valeant are in the top-10 now but that’s about it. Banks, lifecos, energy companies and telcos are typically in Canada’s top-20 list of stocks and I don’t see that changing any time soon!

      The way I see it, there is no great Canadian ETF that maybe complements CDN dividend stocks. Either you double-down or you don’t…since our market is so small on the big world stage.

      I think TD e-series are great products. Nothing wrong with CNR stock, ZRE and ENB. Good long-term holdings unless you decide to unbundle your REITs eventually.


  6. Very nice post. I just stumbled upon your blog and wanted to say that I’ve truly enjoyed browsing your blog posts. In any case I’ll be subscribing to
    your rss feed and I hope you write again soon!

  7. @101 Centavos,

    What account would be best to own Canadian stocks for you folks in the U.S.? Curious.
    I suspect you should be able to run an automatic dividend reinvestment program with your financial institution – why not? That account might be buying only whole shares though, not partial or fractional shares. Let me know what you find out.

  8. I do not know if others know this, but if you want to look at the full stock listing of what these funds hold, you can go to and click on Search Database, then click on Search for Investment Fund documents. Under Investment Fund name put in, say “BMO Dividend Fund” and document type of “Annual Report”. You will get the annual report for all BMO funds.

    The annual report will give you all the investments for each BMO fund as of the date of the filing. All mutual funds must file with SEDAR each year their annual report.

    You can also get the full report on what stocks ETF’s like CDZ hold.

    1. @Susan,

      Thanks for this. You’re right, many folks might not know about SEDAR and good of you to share that. I will ensure to include SEDAR in a future post…about some of my favourite investing tools. Stay tuned for that, as I’m sure you have some of your favourite tools to share as well.

      Have a good weekend!

  9. Mark, thank you for the excellent post! It just reconfirmed my decision to abandon the mutual funds and focus on further building my DRIP portfolio and investing in a few ETFs. Sometimes I wonder why most Canadians would invest exclusively in mutual funds and simply ignore any alternatives like Derek Foster’s approach (and yours too). Even banks’ financial advisors don’t pursue other investment opportunities even though they should be better informed than the general public. Oh, well…you can lead a horse to water…

    1. @Elemag,

      You are welcome for the post and glad you enjoy reading them!

      Some folks aren’t a fan of Derek (Foster) and his dividend-investing strategy, but he was an inspiration for me because he did what he believed in (and still does). His is passionate about his investing style and is making his path work for him. That same approach would not suit others and I respect that. That said, some things he has shared with me (in person as well) totally make sense and fully align with my investment objectives – buy the Canadian banks and not the banks’ products. Looking back, I can’t imagine why I didn’t do this sooner in life 🙂

  10. Instead of owning the mutual funds mentioned here, how about owning the dividend ETFs offered by iShares and Claymore? I am thinking of investing in these — just worried about tax consequences of the dividends earned.

    I haven’t invested in individual stocks yet and at my age (57 years) I think I will be more comfortable with ETFs.

    1. @Be’en,

      Good idea! I’m a fan of both XDV and CDZ, if that is what you are talking about. Lower fees with these ETFs, since I always say: fees are forever. If you keep these ETFs unregistered, you will have some tax conseqences with them as you have pointed out – but this isn’t any different than mutual funds kept unregistered. Alternatively, you could put these ETFs in your TFSA or RRSP if you have contribution room which would shelter all ETF distributions. Disclosure: I used to own XDV in my RRSP. Still read up on these and take your time with your decision, I’m sure you will 🙂

      Thanks for your comment!

    2. Or simply buy the stocks. Any of the big banks will do, pick a couple you like. Pick the one you bank with, that way when you pay ATM fees, it seems less bad. Provided you have about 5 or 6 of the above stocks (not just banks), your returns will be better than ETFs and much better than mutual funds. Individual stocks are no scarier than ETFs.

      1. I would agree Brad. I have structured most of my investing approach around this thesis:
        If some stocks are so risky, then why year after year after year do all the big mutual funds and ETFs hold them?

        -CDN banks
        -CDN telcos
        -CDN utilitites

        Own what the big funds own directly, just diversify that over time. No fees.

        Thanks for being a fan.

    1. @Y&T,

      Thanks! Yes, dividend funds are one good source, but I have a few more other options up my sleeve as well. Stay tuned for that stuff 🙂 BTW – really enjoyed your last post!

  11. I just love it when I run into posts like this.

    I’m in the same camp as you and Dividend Ninja. The vast majority of the positions I have in my own equity portfolio are shares in companies I own directly, and are not part of a fund.

    Dividend Ninja also makes an excellent point. Just because you invest in a dividend fund, you are not the primary beneficiary of the dividends. In fact, you are earning much less than if you had own the stocks directly.

    I’m not trying to knock funds entirely, as I openly admit that I am starting to make positions in some ETFs to add foreign content to my portflolio. In my view, there are some solid ETFs that allow me to have exposure to international-based companies that otherwise would not be available in the North American markets.

    I take the Derek Foster approach one step further and apply the top holdings strictly to international plays. If an ETF has an international play that I am interested in owning and is within the top 10 holdings, but is not available in any of the North American exchanges, then it meets my criteria as a possible buy for an ETF.

    If not, then I’m in the stock directly. If a U.S. or international stock is available on the North American exchanges, I prefer to buy the stocks directly, for the same reasons we are discussing.

    I think you are highlighting what is a crucial concept that beginner investors have the misfortune of either missing out on, or have a hard time realizing this important distinction as it relates to generating income.

    1. @TWC,

      I love posts like this too! 🙂 I used to own the TD Dividend Growth Fund many moons ago, but then I thought, “what the heck, why don’t I just own the companies it holds and stop paying management fees?” The rest they say, is history.

      Yes, that was an excellent point about the dividend fund, you are not the primary beneficiary of the dividends. Needless to say, that sucks. Yet another reason not to invest in mutual funds.

      Interesting your approach with international plays. Makes sense. I’m not ready yet for real, international plays like Nestle or something similar, I’ll own the ETFs for now, instead. I own VWO for Emerging Markets.

      Do let us know what you purchase for your ETFs, and why, in your blogposts. It’s always great to read another perspective. Thanks for your detailed contribution!

  12. Hey MOA,

    This is a great post! Great minds think alike:

    Derek Foster actually pointed this out in one of his books, that all you need to do is look at the top-10 holdings of most Canadian Mutual funds, and you will find they all hold the same stocks. But you have done a great job of laying it out! Same in any other country for that matter. I agree, 10 stocks you can go buy yourself 😉

    Here is the “real” irony! All of these mutual funds claim to be “Dividend Funds”, but in fact they are not. They do not pay out the dividends they collect, or hardly a potion thereof, becuase it all goes into the mutal fund company via the 2.5% to 3.5% in management expense ratios and trailer fees. The word “Dividend” in mutual funds is very misleading.

    This leads onto the next irony. Obviously you can go buy these stocks yourself through a discount broker. But you will also make a higher return on investment (ROI) by holding the stocks directly, through potential capital appreciation and dividend income.

    And the final irony is, when markets go down, mutual funds do not pay you dividends for holding them do they? But stocks sure do! You still get your dividend income regardless of share price.

    Sorry MOA, hope I didn’t give everything away too early 🙂

    1. @ Dividend Ninja,

      Thanks for the link above, great stuff, this only reinforces my point. You’re right – they claim to be “Dividend Funds” but are not because most investors in these funds never see the true dividends paid by the companies, barely a sniff of them! Own the companies, not the companies products, that would be my advice to somebody considering direct stock ownership. Thanks for your comment and no, you didn’t give everything away too early!


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