What are we looking for?
Canadian companies that are increasing dividends while delivering double-digit growth in earnings and free cash flow.
The screen
Canadian equity markets have become more selective as investors weigh moderating economic growth, shifting rate expectations, and geopolitical uncertainty. In this environment, high dividend yield alone is no longer sufficient.
A savvier approach is to focus on dividend growth supported by rising earnings and free cash flow. Companies that can increase distributions while reinvesting in the business signal both financial flexibility and operating strength. Additionally, when payout ratios remain conservative, dividend growth is less dependent on external financing or volatile market conditions.
Using FactSet’s screening tool, I identified Canadian companies with strong capacity to grow future dividends by applying the following criteria:
- Traded on the S&P/TSX Composite
- Market capitalization greater than $1-billion
- Dividend payout ratio of less than 50 per cent
- Forecast 2026 free cash flow and earnings growth greater than 10 per cent
- Three consecutive years of dividend increases (2023 to 2025), and a forecast increase in 2026
The seven companies that passed were ranked by their dividend yield.
What we found
Capital Power Corp. CPX-T, an independent power producer with assets across Canada and the United States, ranked first on the screen with a 4.5-per-cent dividend yield. Earnings are forecast to rebound by 56.1 per cent in 2026 following an expected decline in 2025, reflecting a transition year shaped by asset changes and market conditions. According to its January, 2026, investor presentation, about three-quarters of the company’s expected profits are tied to long-term contracts, meaning much of its revenue is already locked in rather than dependent on daily power prices. For income-focused investors, the combination of predictable revenue, a conservative payout ratio, and projected earnings recovery differentiates Capital Power from slower-growth utilities with similar yields. The company is scheduled to report its full year 2025 results on March 4, 2026.
Tourmaline Oil Corp. TOU-T, Canada’s largest natural gas producer offers a 3.2-per-cent dividend yield and strong projected free cash flow growth. According to its November, 2025, corporate presentation, Tourmaline holds more than 5.5 billion barrels of proved and probable reserves, providing long-term drilling inventory at current production levels. The company also highlights its position as one of the lowest-cost operators in the Canadian natural gas basin, which supports margins and cash flow even in weaker commodity-price environments. The company is scheduled to report its full year 2025 results on March 4, 2026.
The information in this article is not investment advice. The author assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained above.
Arjun Deiva, CFA, is an MBA Candidate at the University of California, Berkeley, Haas School of Business.