Dividend stocks are loved by Canadians because they have a pleasant habit of paying tax-advantaged income that tends to grow over time with the possibility of capital gains along the way. But the Canadian stock market is stuffed full of dividend stocks and it can be hard to find the best it has to offer. That’s why we’re pleased to present the Globe’s Dividend All-Stars for 2025. It provides a wealth of data and analysis on the largest 200 dividend-paying stocks on the Toronto Stock Exchange and includes a star rating for each one. The top 20 stocks get a full five out of five stars and make it into the team of Dividend All-Stars. We’re happy to say that last year’s team outperformed with gains of 29.4 per cent, including reinvested dividends.
Our star system grades each Canadian dividend stock using three primary criteria. It starts with a stock’s yield, investigates its bargain potential, and then checks for signs of trouble. The system is based entirely on the numbers and the idea is to favour stocks with healthy yields that trade at bargain prices and are in stable or improving trends.
Meet the winning team: The 20 best dividend stocks
We believe the Dividend All-Stars method offers an objective take on the largest 200 dividend-paying common stocks on the TSX. Mind you, we skip over newly listed companies with less than 12 months of trading history and try to avoid those that are in the process of being taken over because they are better addressed by merger specialists.
We hope you enjoy the Dividend All-Stars for 2025. You can learn more about how we grade each stock and the 20 five-star stocks in this year’s team below.
Grading Dividends
We start our analysis of each stock with its dividend yield and assign more stars to stocks with generous dividend yields. After all, income investors love it when an avalanche of dividends flows into their accounts on a regular basis.
But companies can also reward their shareholders by buying back their shares. That’s why we consider a stock’s buyback yield, which we measure using the percentage change in a company’s share count over the past four quarters. The idea is to pay attention to the impact of the combination of share repurchase programs and the issuance of new shares to management and employees. We like to see a company’s shares outstanding decline, rather than grow, over time. (In a closely related concept, shareholder yield represents the combination of dividend and buyback yields.)
Next we weigh up each stock’s merit as a value investment and prefer stocks with low prices in comparison to their earnings and cash flow. Our bargain hunting starts by favouring stocks with modest price-to-earnings ratios (P/E) because such stocks have performed well, as a group, over the long term. Similarly, we’re also keen on buying lots of cash flow from operations for a reasonable price and favour stocks with low price-to-cash-flow ratios (P/CF).
Our star system is fortified with measures of safety. After all, a company that recently ran into trouble might seem to offer a high yield, or trade at a low P/E, while suffering from a particularly dire outlook.
Two safety measures are employed in an effort to weed out problem cases. First, we reward stocks on the upswing with high total returns over the past six months relative to their peers. The idea being to avoid stocks the market has soured on, which might have encountered issues that have yet to appear in their financials. Second, more stars are awarded to steady performers with modest volatilities over the prior 260 days than haven’t startled their shareholders in recent times.
We combine all of our yield, value, and market measures to grade the largest 200 dividend stocks on the TSX. The top 20 get a full five out of five stars and form the Dividend All-Stars portfolio.
The Winning Team
We’re pleased to say that our Dividend All-Stars outperformed in their first year at The Globe and Mail. The portfolio gained an average of 29.4 per cent from Feb. 15, 2024, through to Feb. 13, 2025. In comparison, the Canadian stock market, as represented by the S&P/TSX Composite Index, advanced by an average of 24.7 per cent over the same period. (The data herein comes from Bloomberg and includes dividend reinvestment, but not fund fees, commissions or other trading costs. The portfolios are equally weighted.)
In addition, we back-tested our star system to see how it performed over the longer term. The 20-stock Dividend All-Stars portfolio gained an average of 16.4 per cent annually over the 25 years to the end of January, 2025, when an equal-dollar amount of money was put into each stock and the portfolio rebalanced monthly. On the other hand, the market index climbed by an average of 7.3 per cent annually over the same period.
Income investors can take a less-active approach because the Dividend All-Stars portfolio gained an average of 14 per cent annually over the 25 years to the end of January, 2025, when rebalanced annually instead of monthly.
A cautionary tale
The Dividend All-Stars, and our star ratings, provide a good beginning to a stock market adventure, but it is important to arm yourself with further research on each company, its industry and the market before heading out to conquer the market’s dragons.
Be aware of the strengths and weaknesses of numerical techniques because other factors can affect an investor’s success. For instance, the culture and character of a company’s people can elevate – or ruin – a business.
Investors will encounter market monsters that come in all shapes and sizes from malevolent rulers to natural calamities that can depress the market, damage industries and destroy individual companies. Alas, investing is risky and it is nearly impossible to earn a decent return without acquiring a few scars along the way.
While we believe the Dividend All-Stars have what it take to succeed, we expect the road to be bumpy, individual stocks to disappoint, and the market to crumble from time to time. We would be pleased to outperform the market index by an average of a few percentage points a year over the long term. (For the sake of disclosure, the author owns many of the stocks mentioned herein.)
Watch your step when considering stocks that trade infrequently, and those with very low share prices, because they may be difficult to deal with in a timely and cost-effective way.
But enjoy the adventure after mulling over all of the information at your disposal. After all, the purpose of our star system is to help you narrow in on a few dividend payers that might be worthy for inclusion in your portfolio.
Notes: Data from Bloomberg as of Feb. 13, 2025. Figures converted to Canadian dollars. Mcap = market capitalization in millions of dollars. Returns include dividend reinvestment with m indicating months. Volatility = annualized volatility over the past 260 days. Volume = number of shares traded in thousands. P/S = price-to-sales (ttm), P/E = price-to-earnings (ttm), P/CF = price-to-cash-flow (ttm), P/B = price-to-book-value, Yield = indicated dividend yield, ROE = return on equity, ROA = return on assets, and Leverage = Assets/Equity. (ttm = trailing 12 months.) Type shows dividend frequency (Q=quarterly, M=monthly, A=annually, S=semi-Annually, and I=irregular) and dividend currency (C=Canadian or U=U.S.) Price in USD for .U tickers.