Canadian Dividend Stocks

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Dividends are a special payment made to share holders of a stock that varies in size, frequency and nature. Many stocks in Canada issue stock dividends and this section is here for you to learn more about them.

The management team of a company may choose to issue dividends (or may be obligated to) at a set ammount per share for each share holder. Most often dividends are used as a way to distribute some or all of the company's profits to those who actually own the company (the shareholders).

What is a Dividend?

For instance, company X, which has a share value of $10 issues a $1 dividend to shareholders. If you own 100 shares of company x, you will receive $100 in dividends (100 shares X $1). The "yield" of this dividend is said to be 10% (assuming that is the only dividend issued this year as yields are set annually).

Depending on the mangement, the nature of the stock you own and other factors, this dividend might be a regular occurence (occuring on an annual, quarterly, or monthly basis). Some dividends, such as those issued to prefered shareholders, the company is often obliged to issue. Dividends on common shares, however, the board of governors might elect to suspend the dividend if the money is needed for capital investment or if they had a bad quarter.

REITs are another high yield dividend paying security. Since they are considered to be income trusts , they legally have to distribute a certain percentage of their profits in the form of dividends. Prefered Shares function more like bonds and have a set dividend rate which they have to adhere to (the most they can do is defer the payment for a future date).

Dividends on Canadian stocks have many advantages given the current tax climate in Canada. If you invest in Canadian dividend payers, you are setting yourself up for possible massive tax advantages. Many companies - especially older, well established so-called blue chip companies, have setup Dividend Reinvestment Programs (DRIPs). What these entail is the shareholder can elect to have dividends that are issued to them to be automatically reinvested in the form of share of the said company. Some dividend investors have suggested that this is the ultimate historical way to make the most money on the stock market.

Articles about Dividend investing for Canadians.

How dividends work

When a company annouces a dividend, they will likely announce the following dates "Date of record", "ex-dividend date" and "payment date". If you are trying to catch a dividend, the most important date to note is the ex dividend date. If you are a shareholder on the ex-dividend date, then you are the one who will receive the dividend payment. Even if you buy the shares the day before, or sell them to a fellow Canadian the day after, you are the one who will receive the dividend payment.

Which companies pay dividends? As we stated previously, any board of governors can pay a dividend. However, the type of company who you see who pays dividends and who often have the highest yields are older, more established, large companies who have corned their market. Often large growth is not likely in the books for these companies, so they may not need their profits to reinvest in expansion. They reward their Canadian shareholders by issuing them fat dividends for their patience and investment.

Standard Sources of Investment for Dividend investors: Canadian Income/Royalty Trusts (including Real Estate Investment Trusts), Yielding ETFs, preferred shares, large cap established stable companies.