As a special feature, I am looking for the best Canadian stocks; my newest dividend all-star from up north is Canada's largest fast-food chain, named after an iconic hockey player, explains Chloe Lutts Jensen in her Cabot Dividend Investor.

If you're Canadian, you already know I'm talking about coffee-and-donuts chain Tim Hortons (THI).

What you may not know is that, in addition to being a great place to pick up a "double double" (Canadian for coffee with two sugars and two cream), Tim Hortons is also a great dividend payer.

The company has paid dividends since 2006, and has increased the dividend each year since 2007. Most impressive, they've increased the dividend by an average of 24.5% every year! That's a best-in-class dividend growth rate.

Tim Hortons also has a healthy payout ratio of 34% and has generated positive free cash flow for the past three years.

My colleague Roy Ward, chief analyst of the Cabot Benjamin Graham Value Investor, also likes Tim Hortons' value characteristics.

He recently explains, "The company is aggressively opening new restaurants in North America as evidenced by the launching of 174 new restaurants in the last six months. New menu items and store upgrades are bolstering sales and earnings.”

Roy rates the shares as low risk and he expects the stock to reach his minimum sell price target of $68.56 within one year.

His valuation methodology has never steered me wrong before, and my system agrees with his analysis of THI's earnings and dividend strength.

So, for medium- to long-term investors interested in an undervalued company that pays you a growing income stream, Tim Hortons is my favorite Canadian dividend payer to buy now.

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