Where to Look for Surprising Dividend Stocks

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Lots of investors like to stay close to home with their money. But by doing so, they miss out on some great opportunities among international stocks that more adventuresome folks discover all the time.

Still, it's understandable if you're a little bit nervous about putting your hard-earned money to work in foreign stocks. After all, if the closest you've ever come to Thailand is hearing One Night in Bangkok on some '80s music station, then discovering that the country is suffering civil unrest isn't going to make you want to rush out and make an especially risky investment there. Instead, like someone traveling abroad for the first time, you might want to start out with baby steps, by staying relatively close to home.

Oh, Canada!
Our neighbors to the north give you a perfect place to introduce yourself to international investing. After all, Canada is closely linked economically to the U.S. and is our biggest trading partner. It's also easy to invest in Canadian companies, as many of them list their shares on U.S. stock exchanges or are available via exchange-traded funds.

Of course, figuring out exactly which investments are the best ones for you is just as complicated a question in Canada as it is on our side of the border. But one strategy doesn't require a passport and works well wherever you're investing: Just choose stocks that have paid healthy dividends over time.

These stocks pay, eh
Many U.S. investors are quite familiar with the exclusive class of stocks that have had steadily rising dividends over the decades. These stocks, dubbed dividend aristocrats by Standard and Poor's, have survived through good times and bad without forcing shareholders to suffer dividend cuts.

What you may not know, however, is that dividend aristocrats aren't just an American phenomenon. You can find them in Canada, too, and they're just as intriguing as their American counterparts. Here's a partial list of Canadian dividend aristocrats that are as close as your regular brokerage account:


Dividend Yield

1-Year Return

Bank of Nova Scotia (NYSE: BNS  )



Ritchie Bros. Auctioneers (NYSE: RBA  )



Thomson Reuters (NYSE: TRI  )



Encana (NYSE: ECA  )



Toronto-Dominion (NYSE: TD  )



Telus (NYSE: TU  )



Enbridge (NYSE: ENB  )



Source: Standard & Poor's, Yahoo! Finance.

Now first of all, you need to understand that the standards for qualifying as a Canadian dividend aristocrat aren't quite as tough as for their U.S. counterparts. All you have to do to qualify is raise dividends for five consecutive years. Yet even those relaxed standards limit the number of eligible stocks to 56.

There are, however, some interesting things about this list. Consider:

  • Telus and Shaw Communications, which also qualifies, are both telecoms, which you'll also find among the highest-yielding U.S. stocks.

  • You'll also find several energy stocks, including Encana and Enbridge, on the list. Canada is particularly rich in natural resources, which helps explain why its stock market has outperformed the S&P 500 over the past five years.

  • Perhaps most remarkably, you'll find banks like TD and ScotiaBank on the list. In the U.S., most banks fell off the list when they were forced to slash dividends in the wake of the 2008 financial crisis and TARP bailout. Canadian banks survived much better, in part because their mortgage requirements were always more strict than U.S. mortgages, and partly because the real estate bubble didn't inflate to the same extent.

Of course, you'll find risks as well as potential rewards by investing in Canadian stocks. Given how reliant the economy is on energy and mining, especially in the western part, Canada's prospects are largely tied to the prices of these products. Favorable trends have supported the economy and Canada's currency, which recently rose above parity with the U.S. dollar before falling back. If those trends reverse, though, then you could find yourself with quick currency-based losses even if the companies continue to perform well in their home markets.

Go north, young Fool
There are plenty of similarities between U.S. and Canadian stocks, and lots of differences as well, but you might want to start with that country to get a taste of what investing abroad is like. It's a short trip that could give your portfolio a lot more than just a souvenir T-shirt.

The best investors in the world are looking to dividend stocks. That why Fool contributor Jim Royal's asking this: If Warren Buffett's a dividend investor, why aren't you?

Fool contributor Dan Caplinger is looking forward to his Canada trip late next month. He doesn't own shares of the companies mentioned in this article. Ritchie Bros. Auctioneers is a Motley Fool Hidden Gems recommendation. Bank Of Nova Scotia is a Motley Fool Income Investor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy loves a good cruller.

Read/Post Comments (2) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 07, 2010, at 9:03 AM, Laufnee38 wrote:

    I would have expected to see Penn West Energy (8.9%), Arc Energy Trust (5.7%) and Transalta (5.6%) in this list as well?

    These are mentioned in the high yielding top 5:



  • Report this Comment On June 18, 2010, at 4:51 PM, philkek wrote:

    Thanks MF and Laufnee38 for this high yielding dividend information. I will do my homework on the fundamentals to see if these look as good as they sound. Investigate before you invest, as Better Business Bureau tells people. Foreign investing sounds good for diversification and Canada is a good place to start. Fool on for profits.

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