If you are looking to purchase Canadian stocks that pay a high dividend income, then continue to read. We have done the research for you and have made a list of 10 High Paying Canadian Dividend Stocks.

Dividend stocks distribute a portion of the company’s earnings to investors on a regular basis; – this could be monthly, quarterly, semiannually or annually. Most Canadian dividend stocks pay investors a set amount each quarter, and the best companies increase their dividend payouts each year. This is a great way to build a cash flow stream. What alot of dividend investors do is reinvest the dividends that are paid to them so that they earn more dividends next time.

Companies that pay dividends tend to be well-established, so dividend stocks may also add some stability to your portfolio.

Investing for income: Dividend stocks vs. dividend funds

There are two main ways to invest in dividend stocks: Through mutual funds or ETF (Exchange Traded Funds) — that hold dividend stocks, or by purchasing individual dividend stocks.

Take a look at our other article What Is Dividend Investing?

Dividend ETFs or Mutual Funds offer investors access to a group of dividend stocks within a single investment. This means with just one transaction, you can own a portfolio of dividend stocks. The fund will then pay out dividends to you on a regular basis, which you can take as income or reinvest. Dividend funds offer the benefit of instant diversification — if one stock held by the fund cuts or suspends its dividend, you can still rely on income from the others. This fund is usually managed by a professional money manager so you can also rely on their expertise.

Whether it’s through dividend stocks or dividend funds, reinvesting those dividends can greatly enhance your return on investment; dividends typically increase the return of a stock or dividend fund by a few percentage points. Historically the total annual return (which includes dividends) of the S&P 500 has been, on average, about two percentage points higher than the index’s annual change in value.

That difference can really add up. Using TD Canada Trust’s Investment Calculator, we can see that an initial contribution of $200 plus monthly contributions of $200 for 20 at the 9% annual market average, your investment cold grow up to $127,778. Bump that up to 11% growth to include dividends, and now you would have $161,723 because of the dividends.

In general, a good rule of thumb is to invest the bulk of your portfolio in index funds, for the above reasons. But investing in individual dividend stocks directly has benefits. Though it requires more work on the part of the investor because the investor is responsible to perform the research into each stock. You should note that investors who choose individual dividend stocks are able to build a custom portfolio that may offer a higher yield than a dividend fund. Expenses can also be lower with dividend stocks, as ETFs and index funds charge an annual fee called a Management Expense Ratio (MER), to investors.

How to invest in dividend stocks

You will need a Self Directed Investment account and depending on what bank you bank with, you should easily be able to open one of these accounts. We have given a list below. After you open you Self Directed Investment Account, you transfer funds to your new account, find a stock, press the buy button, and as simple as that you are invested.

Self Directed Investment Accounts

TD Direct Investing (click here)

RBC Direct Investing (click here)

Scotia iTrade (click here)

BMO Investor Line Self Directed (click here)

CIBC Investor’s Edge (click here)

Interactive Brokers Canada (click here)