Hiding in Plain Sight: Canada's *Almost* Best Dividend Growers

Once every couple of months I share a list of Canada’s dividend champions on Twitter (I’ll never call it X). These are stocks that have raised their dividends each and every year for at least a decade.

There are now 51 names on the list (I missed Power Corporation and EQ Bank originally), and I continue to think that it’s an excellent hunting ground for new Canadian stock ideas. A company can fake it for a while, but ultimately dividend growth comes from earnings growth — which is one of the things we’re looking for around here.

Dividend growers also have a long history of outperformance in Canada. According to data compiled by Royal Bank, Canadian dividend growers delivered a 10.9% CAGR from 1986 through 2024, compared to a 6.5% CAGR for the TSX Composite. That’s a massive outperformance that a lot of investors choose to ignore.

Dividend growers also had less volatility — which is another thing a lot of investors value.

Plus, companies with long dividend streaks have proven they have the ability to keep increasing their payouts even during tough times. That’s another feature we’re looking for around here. It’s especially important to those who want to build a passive income stream that will support they through retirement.

Anyway, here’s the list for those who haven’t seen it already. I like to share the link because then you’ll have a resource that is periodically updated. It also includes five-year dividend growth rates and approximate payout ratios for each name.

I’d tell y’all to bookmark that bad boy, but I’m not sure anyone bookmarks anything on the internet anymore.

While I continue to think the list is an excellent place to start looking for investment ideas, I’ll also admit that there are a couple of issues in limiting your investment universe to stocks that appear in this list. It turns out that there are excellent companies that just barely miss appearing in the list for whatever reason. By being too rigid we miss out on some of these companies — even though they might be solid additions to the portfolio.

Let’s discuss a few of those this week, the almost best dividend growers, and why they’re likely still good places to put your dollars.

Just missed banks

If you look closely at the Dividend Growth Champions list, you’ll notice something interesting. Four of Canada’s top seven banks make the list, while the other three don’t.

The four that made it are:

• EQ Bank (19 years)

• Royal Bank (15 years)

• National Bank (15 years)

• CIBC (15 years)

And the ones that didn’t include:

• TD Bank

• Bank of Montreal

• Bank of Nova Scotia

Canada’s banks have some of the best long-term dividend growth records on the planet. Bank of Montreal has paid a dividend each and every year since 1829. It has also raised the payout most of those nearly 200 years — although not every year.

Its peers aren’t quite that impressive, but each of TD, BNS, RY, CM, and NA each have consecutive dividend streaks that surpass 100 years.

So, what gives? Why are some Canadian banks on the list and others aren’t?

Let’s start with the easy one. In 2024, as it struggled with underperforming assets in Latin America and a few issues with its Canadian business, Scotiabank made the decision to freeze its quarterly dividend at $1.06 per share. It eventually raised it again in 2025 to $1.10 per share, and will likely raise again in 2026.

TD and BMO are trickier. In 2020 as COVID created massive uncertainty in the economy, Canada’s financial regulator told banks and insurance companies that they weren’t allowed to raise their dividends. The restriction stayed until Q4 2021.

What happened is we had a scenario where certain banks didn’t increase their dividends in 2020 before the restriction. Restrictions were lifted in 2021 and banks made up for lost time with 10-20% hikes.

COVID created a situation where certain banks technically weren’t allowed to increase their dividends. Therefore, they’re punted off lists like mine — despite doing nothing wrong. They wanted to hike! But regulators said no!

It would be silly to not invest in these names based on a technicality. Only some banks appearing on the list is, by far, the biggest weakness of it.

Pembina — another ‘just misser’

Another company that just missed making it onto the list is Pembina Pipeline (TSX:PPL)(NYSE:PPA).

Like the banks, the issue came during COVID. As it became obvious that the vast majority of us would be stuck at home for a while, the price of oil collapsed. Traders and other short-term market participants did their thing, and the price of oil famously went negative.

This only happened for a day, but the screenshots will live forever.

Amid that environment — and the subsequent oil price weakness that persisted into 2021 — Pembina made a reasonable choice and kept its dividend unchanged in 2021, after increasing it in January, 2020.

This means that, since 2010, Pembina has the following dividend growth record:

• 2010 ❌ (Converted from an income trust)

• 2011 ✅ 

• 2012 ✅ 

• 2013 ✅ 

• 2014 ✅ 

• 2015 ✅ 

• 2016 ✅ 

• 2017 ✅ 

• 2018 ✅ 

• 2019 ✅ 

• 2020 ✅ 

• 2021 ❌ (worst energy bear market in a generation)

• 2022 ✅ 

• 2023 ✅ 

• 2024 ✅ 

• 2025 ✅ 

2026 is to be determined, but I like Pembina’s chances.

Oh, and if that isn’t enough, Pembina had multiple distribution increases back in the 2000s when it was an income trust. It entered the decade paying $0.08 per share each month. By the end of 2009 the distribution was 62.5% higher, checking in at $0.13 per share. That was despite the company paying out virtually all of its profits as distributions.

These days, Pembina has a payout ratio of only a hair above 50%. The cash flow it doesn’t pay to investors can be put towards growth, which makes dividend growth all the easier.

Pembina converted to quarterly payments in 2022, and currently pays $0.71 per share each quarter. That’s 82% higher than 2010, plus investors got a generous yield of at least 5% pretty much the whole time.

This is another example of a stock with an excellent history of dividend growth that only barely missed being included in the list. It shouldn’t be ignored.

Another high yield pauser

Canadian Net REIT (TSXV:NET.un) continues to be one of my favourite Canadian REITs. It offers:

• A unique triple net business model which makes maintenance, insurance, etc., the responsibility of the tenant

• A focus on secondary markets where there are more opportunities (and higher cap rates)

• Terrific valuation of about 9x FFO

• A low distribution payout ratio of around 50%

• A generous 5.7% yield, with growth potential

In fact, NET.un has one of the best distribution growth records in the Canadian REIT space. Since its IPO in 2011, it has increased the payout each and every year except one.

In 2024 — amid higher interest rates and a general bear market for REITs in general — the company decided to pause distribution growth. It then only raised the distribution by about 1% in 2025. And, as you can see below, distribution growth wasn’t very exciting in 2023, either.

Pausing distribution growth was a smart idea. The payout ratio went from approximately 60% of FFO to just over 50% of FFO. The balance sheet has improved and the company was able to acquire new assets at attractive cap rates without taking on too much additional debt. The company is in a better place today than it was a couple of years ago.

Should Canadian Net be punished because it essentially hasn’t raised distributions since 2022? I sure don’t think so. That well-timed pause has put the company in a good spot to resume raises in 2026 and beyond, which is exactly what investors should be looking for over the long-term.

What about a ‘technical dividend cutter’?

Pembina wasn’t the only company struggling during COVID. At least oil companies were allowed to still pump. Many restaurants were forced to close completely.

Many Canadian restaurant stocks had no choice. They were forced to suspend dividends as business cratered. A&W (TSX:AW) was one such stock, and your author was buying as shares fell to the $25 range.

The company recovered and began paying dividends again by the end of 2020. It hiked the payout in 2021 and by 2022 it was back to paying its pre-pandemic payout of $0.16 per share each month.

At the time I thought it was silly to penalize A&W for cutting its dividend, and I continue to think that was a smart move on my part. The company has recovered and was acquired in 2024 by A&W Food Services.

The company seems more interested in paying a steady dividend for the next little while, choosing instead to direct excess cash flow to expanding or paying off debt. Still, A&W offers a 5.3% dividend today, it’s plans to increase sales by 3-5% in 2026, and it gushes cash. It’s not such a bad choice for dividend investors.

The bottom line

As much fun as these dividend growth lists are, I’m the first to acknowledge their fallibility. They’re just too rigid. It turns out that some of Canada’s better dividend growers are right there, hiding just outside of the box.

We can find decent opportunities if we adjust our thinking a little bit and look at stocks that just barely miss making the list. These are generally wonderful companies that either made prudent long-term moves or were forced by some external source to stop raising their dividends.

This type of thinking isn’t just limited to dividends, either. Progress isn’t linear in life; often we take two steps forward and then a step back. We plateau when learning a new skill until something happens and we have a breakthrough. Choppy growth is still growth, even if it doesn’t appear on some list somewhere.

Remember, we have a comment section now. Feel free to leave your thoughts!