Why would a company pay dividends?<\/h3>
Companies pay dividends to share profits with shareholders. It\u2019s a way of rewarding investors for putting up their own money to support the company.<\/p>
Of course, it also has the benefit of making the stock a more appealing investment. When investors are choosing stocks, a company that has a track record of delivering consistent dividends becomes a more attractive prospect, so paying dividends can increase demand for the company\u2019s stock and attract more investors.<\/p>
That said, it\u2019s not a mandatory requirement for companies to pay dividends to shareholders. They can choose to reinvest profits into the business instead, which can in turn reward investors with the growth of the business and an increase in the stock price.<\/p>
How are dividends calculated?<\/h3>
The dividend payment you receive will depend on two factors:<\/p>
- The dividend the company pays per share.<\/li>
- The number of shares you own.<\/li><\/ul>
To calculate your dividend, multiply the dividend amount by the number of shares you own. Let\u2019s say a company is paying a $0.50 dividend per share:<\/p>
- If you own 500 shares, you will receive a payment of $250 (500 x 0.50).<\/li>
- If you own 1,000 shares, you will receive a payment of $500 (1,000 x 0.50).<\/li><\/ul>
Examples of Canadian companies that have paid dividends<\/h3>
Dividends are generally paid out by well-established, stable companies, and many blue-chip stocks have a history of paying consistent dividends. Growth companies are less likely to pay dividends \u2014 their focus is often on reinvesting profits back into the business instead.<\/p>
The Royal Bank of Canada (RBC) is one well-known example of a Canadian dividend-paying company. It distributes dividends to shareholders on a quarterly basis, with payments made in February, May, August and November.<\/p>
In November 2025, RBC will pay a dividend of $1.54 per share. So if you own 200 RBC shares, you will receive a dividend payment of $308 (200 x 1.54).<\/p>
We\u2019ve compiled a list of large Canadian companies that pay dividends here:<\/p>
- Agnico Eagle Mines<\/li>
- Bank of Montreal<\/li>
- Bank of Nova Scotia<\/li>
- Barrick Gold<\/li>
- Brookfield Corporation<\/li>
- Canadian Imperial Bank of Commerce<\/li>
- Canadian National Railway<\/li>
- Canadian Natural Resources<\/li>
- Canadian Utilities<\/li>
- Enbridge<\/li>
- Fortis<\/li>
- Manulife Financial<\/li>
- Royal Bank of Canada<\/li>
- Sun Life Financial<\/li>
- Thomson Reuters<\/li>
- Toronto-Dominion Bank<\/li>
- Whitecap Resources<\/li><\/ul>
\n \nDive deeper: <\/span>Canadian dividend stocks<\/a>\n<\/div>\n<\/article>Dividend dates to watch out for<\/h3>
There are a few key dividend dates you need to be aware of:<\/p>
- Announcement date (or declaration date).<\/strong> This is the date when the company announces a dividend payment. The dividend will need to get the OK from shareholders before it can be issued.<\/li>
- Ex-dividend date.<\/strong> In order to receive a company\u2019s dividend payment, you must hold the shares prior to its ex-dividend date. If you buy shares on or after an ex-dividend date, you won\u2019t receive this dividend, but you will be eligible for the next dividend payment, if there is one.<\/li>
- Record date.<\/strong> This is the date on which you must be listed on the company\u2019s books as an investor in order to qualify for a dividend. It\u2019s usually one business day after the ex-dividend date.<\/li>
- Payment date.<\/strong> This is the date when you will receive the dividend payment.<\/li><\/ul>
What is a dividend reinvestment plan?<\/h3>
Some companies offer what is called a dividend reinvestment plan (known as a DRIP). If you opt in to a DRIP, you can use your dividends to buy more shares in the company instead of receiving the dividend payment in your bank account.<\/p>
There are several advantages of doing this, but the main one is that you\u2019re able to use the money to buy more shares<\/a> without paying any brokerage fees. It\u2019s also an easy, passive way to gradually increase your position in a company over time with little to no effort. It\u2019s a good set-and-forget investment strategy: once you opt in, it all happens in the background automatically.<\/p>
But there are downsides. Not only do you miss out on using dividends as a source of income, but you also don\u2019t get to choose the price at which you buy more shares. The shares are instead automatically bought on your behalf on the date of the dividend payment.<\/p>
Why invest in dividend stocks?<\/h3>
The biggest benefit of investing in stocks that pay dividends is that they provide passive income. Unlike an active strategy like day trading<\/a>, once you\u2019ve bought your stocks, you don\u2019t have to lift a finger to receive regular dividend payments into your bank account. This steady source of income can be particularly helpful for retirees.<\/p>
Alternatively, you can use dividends to increase your investment with a dividend reinvestment plan. Like a savings account that pays interest on your interest, a DRIP allows you to compound your returns.<\/p>
Dividend stocks also offer protection from stock market volatility. While stock prices are always fluctuating, established companies that pay dividends offer stability to help you ride out any market downturns. Best of all, you can also take advantage of the growth in value of a stock over the long-term.<\/p>
\n \nDive deeper: <\/span>Guide to the best commission-free stock trading in Canada<\/a>\n<\/div>\n<\/article>How to choose dividend stocks<\/h4>
Comparing a range of options to try to find the best dividend stocks? Ask yourself the following questions.<\/p>
- How often are dividends paid?<\/strong> Some companies pay dividends monthly or quarterly, while others only pay once per year.<\/li>
- Have dividends been confirmed?<\/strong> Companies will often confirm their dividend payments for the year ahead in advance.<\/li>
- Are dividends growing in value?<\/strong> Take a look back at the dividends paid by each company over previous years. If the value of the dividend has gradually increased, this is a good sign the company is growing and could continue to increase its dividend.<\/li>
- What\u2019s the dividend yield?<\/strong> Is the yield higher than what you could earn with a high interest savings account<\/a>?<\/li>
- What shape is the company in as a whole?<\/strong> It\u2019s important to look beyond the dividend yield and evaluate the company\u2019s overall financial position. Is it an established company with a reliable business model? What are its revenue, cash flow and profit figures?<\/li><\/ul>
\n - Have dividends been confirmed?<\/strong> Companies will often confirm their dividend payments for the year ahead in advance.<\/li>
- Ex-dividend date.<\/strong> In order to receive a company\u2019s dividend payment, you must hold the shares prior to its ex-dividend date. If you buy shares on or after an ex-dividend date, you won\u2019t receive this dividend, but you will be eligible for the next dividend payment, if there is one.<\/li>
- Announcement date (or declaration date).<\/strong> This is the date when the company announces a dividend payment. The dividend will need to get the OK from shareholders before it can be issued.<\/li>