Top 3 Undervalued Canadian Dividend Stocks to Watch

Investors keen on dividend stocks may find attractive opportunities in undervalued Canadian equities. Despite overall growth in the Canadian stock market, several dividend stocks remain compelling buys due to their reliability and strong fundamentals.

Performance of Canadian Dividend Stocks

Canadian stocks have surged by approximately 30% over the past year, according to the Morningstar Canada Index. Furthermore, the Morningstar Canada Dividend Yield Focus Index has seen a remarkable increase of nearly 26% during the same period. These growth figures indicate resilience and potential for income-focused investors.

Top 3 Undervalued Canadian Dividend Stocks to Watch

• Telus
• Cogeco Communications
• Northland Power

Telus

Telus is one of Canada’s leading telecommunications companies, commanding about 30% of the wireless market. The company has invested heavily in upgrading its infrastructure by replacing its legacy copper network with advanced fiber-optic technologies. As a result, Telus is well-positioned for ongoing success.

Currently, Telus’s stock is trading at a significant 36% discount to its fair value estimate, and it offers an attractive forward dividend yield of 8.6%. This investment has shown consistent dividend growth over the last decade. However, in December, the company opted to pause dividend increases to strengthen its balance sheet, indicating a focus on sustainable growth in a challenging economic landscape.

Cogeco Communications

Cogeco provides essential communication services, including broadband internet, television, and landline phone service to approximately 2.1 million customers in Canada and 1.8 million in the U.S. Analysts expect the company to increase its dividend by high-single-digit percentages annually, maintaining a conservative payout ratio of under 40% of its free cash flow.

Despite heightened competition, Cogeco focuses on serving less competitive rural markets, positioning itself as a leader in these areas. The stock currently trades at a 16% discount to its fair value estimate, with a forward dividend yield of 5.8%.

Northland Power

Northland Power is a global player in renewable energy, specializing in clean power generation assets. The company has expanded its influence into international markets, particularly in offshore wind energy. Trading at a 16% discount to its fair value estimate of C$22, Northland offers a forward dividend yield of 5.7%.

In November 2025, Northland made the tough decision to reduce its dividend by 40% to enhance financial flexibility. This strategy reflects a commitment to long-term growth and diversification, focusing on both offshore and onshore renewable energy opportunities.

Investment Outlook

For investors seeking reliable income amidst fluctuating market conditions, these undervalued Canadian dividend stocks present compelling choices. Their strong financial positions and ability to adapt to industry changes make them worthy of consideration in any investment portfolio. As the economic landscape evolves, these companies remain committed to sustaining their shareholder value while navigating challenges.