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During periods of heightened market volatility, stock investors often lean toward the relative certainty of dividend yields. Companies with long histories of paying dividends—known as “dividend aristocrats”—can offer even greater comfort.
The dividend aristocrats underlying the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF CDZ are established Canadian companies that have raised their cash dividends every year for at least five consecutive years. Many are mature businesses with solid earnings to support sustainable dividend increases, and they are often run by management teams that make dividends are part of their capital discipline.
To find the best dividend aristocrats to buy, we screened the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF for names covered by Morningstar analysts with 4 or 5 stars, meaning they’re trading in undervalued territory.
What to Know About Investing in Dividend Aristocrats
Dividend aristocrats can be compelling investments, but it’s important to note that they can occasionally cut dividends if business conditions demand. “A streak of annual dividend increases of any length provides no guarantee that a company’s dividend is secure,” cautions Morningstar’s David Harrell. For instance, Nutrien NTR cut its dividend in half in 2017.
Further, dividend aristocrats aren’t attractive unless they’re underpriced. Overpriced stocks (even those with a solid track record of dividend growth) can expose a portfolio to greater price risk.
6 Undervalued Dividend Aristocrats to Buy Now
These undervalued stocks have strong balance sheets, a dominant position in their respective markets, and have grown their dividends for at least 5 consecutive years.
Telus TCogeco Communications CCA Nutrien NTR Restaurant Brands International QSR Magna International MG West Fraser Timber WFG
Telus
Telus tops our list of the best dividend aristocrats. The stock trades at a more than 25% discount it its fair value estimate of C$30 as of June 9, and it boasts a forward dividend yield of 7.44%. The company has raised its dividend consistently for over five years in a row. Morningstar strategist Samuel Siampaus notes that Telus has deployed an aggressive shareholder return strategy, growing average dividends per share at 7% per year.
“Dividend growth has been a hallmark of Telus’ capital allocation strategy and we don’t expect that to change any time soon. The firm has grown its dividend per share at an average of 7% per year since 2013, and we expect a similar trajectory through our forecast. Dividend payments have averaged roughly 80% of the firm’s cash flow since 2018. We expect the firm to continue to deploy a similar amount of its cash flow to its cash returns through our forecast.
“We don’t expect the firm’s debt balance to be problematic as it had over C$ 1 billion cash on its balance sheet and an interest coverage ratio of 5.3 times as of the first quarter. [Nor do we anticipate] any material spending requirements over the next several years.”
Read Morningstar’s full report on Telus.
Cogeco Communications
Cogeco provides telecom services—including wireline services such as broadband internet, TV, and landline phone services—in rural areas of Canada and the United States. The 4-star stock’s current market price of C$67.81 per share reflects a 26% discount to its fair value estimate. “The firm has grown its dividend at a 14% annual rate since 2010,” Siampaus notes, adding that “despite heavy capital investment, its dividend payout ratio as a percent of free cash flow has remained near 30% since 2018.”
Siampaus continues: “We forecast the firm to grow its dividend per share in the high-single-digit percentage range each year. However, we also model the firm generating significant free cash flow, at an average of 18% of sales through our forecast, leaving the dividend payout below 40%. Management will have ample opportunity to use the remaining free cash flow to pay down debt and return the balance sheet to its leverage targets.
“Net debt was 3.4 times EBITDA as of the end of February 2025, its fiscal second quarter, which is above management’s target of 3 turns. The firm’s 2021 acquisition of WideOpenWest for C$1.1 billion and continued network expansions are the culprit. We don’t expect Cogeco to make material acquisitions in the near term, and management plans to focus increasingly on scaling existing networks rather than expansion.”
Read Morningstar’s full report on Cogeco Communications.
Nutrien
The only stock on our list from the materials sector, Nutrien trades at a hefty 31% below its fair value estimate. The firm produces agricultural products including nitrogen, potash, and phosphate.
Morningstar equity analyst Seth Goldstein says that Nutrien “should be able to maintain the dividend even when fertilizer prices are at cyclically low levels. Nutrien is in good financial health. As of March 31, we calculate net debt/adjusted EBITDA was around 2.2 times. Nutrien should remain in solid financial health even as fertilizer prices are below midcycle levels.
“Nutrien pays a dividend, which is set for USD 2.18 per share in 2025 on an annualized basis. With no costly capacity expansion projects underway, Nutrien should continue to generate enough free cash flow in any given year to be able to raise its dividend and repurchase shares. With no major capital expansion projects, we expect Nutrien’s balance sheet to remain in decent shape throughout the cycle.”
Read Morningstar’s full report on Nutrien.
Restaurant Brands International
This company owns popular restaurant brands, including Burger King, Tim Hortons, and Popeyes, boasting a footprint spanning more than 100 countries and a network of compelling master franchise partners. The company’s dividend payout remains attractive to income investors.
“Further returns of capital through share buybacks offer incremental upside (when executed at or below our fair value estimate), with our model calling for C$10.6 billion in capital returns through 2029,” says Morningstar equity analyst David Swartz.
“Though RBI carried a hefty C$12.7 billion in net debt at the end of the fourth quarter of 2024, we view its financial strength as solid, with a heavily franchised model driving strong free cash flow generation and allowing the firm to easily meet its fixed obligations. This degree of leverage is consistent with other heavily franchised operators in our coverage, and our forecast of 3.3 times net debt/EBITDA over the next half decade suggests that the firm should be able to comfortably meet its interest obligations.
“Minimal capital expenditure requirements have allowed RBI to return substantial capital to shareholders. While the firm remains enmeshed in an investment cycle as it remodels more than 1,000 Burger King restaurants, we expect a gradual return to similar capital investment levels as those stores are remodeled and refranchised over the next half decade. Elsewhere, the firm’s targeted 75% long-term payout ratio is quite generous, increasing the allure for income investors.”
Read Morningstar’s full report on Restaurant Brands International.
Magna International
The world’s largest and most diversified auto parts supplier, Magna has raised its dividend for 15 straight years. The stock is trading at a substantial 27% below its fair value estimate of C$77. Magna’s corporate constitution requires a healthy common stock dividend. Its 2024 payout ratio was 35.1% of adjusted diluted EPS.
“Management says that primary deployment of capital is to preserve liquidity and high investment-grade credit rating metrics, reinvest in operations (organic growth through innovation plus acquisitions), and return excess cash to shareholders including continued dividend per share growth with share repurchases,” says Morningstar equity analyst David Whiston.
“Magna has a clean balance sheet with limited debt and ample liquidity. Interest expense is low, reducing risk to profits during a customer production downturn like that of the covid-19 pandemic and the microchip shortage. With limited leverage on the balance sheet, Magna could make a relatively large acquisition if the right opportunity were to present itself.
“Magna announced a 28.5 million share repurchase program in November 2024, which at prices at that time would cost about USD 1.2 billion for about 10% of the company.”
Read Morningstar’s full report on Magna.
West Fraser
West Fraser stock looks 14% undervalued relative to Morningstar’s C$121 fair value estimate. Canada’s leading lumber company with mills and market presence on both sides of the US-Canada border, has consistently raised divided over the past nine years, payable in US dollars. The firm paid USD 26 million of dividends in the first quarter of 2025, or USD 0.32 per share, and declared a USD 0.32 per share dividend payable in the second quarter of 2025.
Says Morningstar’s Spencer Liberman: “We think West Fraser has a sound capital structure, and its consistent free cash flow generation should easily support its debt-service requirements and future capital-allocation decisions. The firm has historically operated with moderate amounts of leverage and has not changed its leverage profile much for years. Net debt/adjusted EBITDA has remained below 1.0 times for a few years now, and we expect this trend to continue.
“A slowdown in housing starts and repair and remodel spending could cause West Fraser to increase its leverage, but we don’t think it would be a material concern. The company has roughly USD 200 million in outstanding debt that matures in 2025 and maintains roughly USD 650 million of cash on its balance sheet.”
Read Morningstar’s full report on West Fraser.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
