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3 Dividend Champions Yielding Up to 5%

trophy award winIf you want to read about sexy biotech companies with unpronounceable buzzwords or exotic energy companies searching for oil fields in the Africa, then dividend investing isn’t for you.

But if you prefer good, old-fashioned companies and will trade cocktail party stock tips for common-sense investing, then you’ll like this strategy just fine.

It comes as a shock to many investors, but the best companies don’t have to come up with the next high-tech gadget every year. Rather, the best investments are the boring businesses that generate consistent profits year after year. With this theme in mind, here are three stocks to get you started.

1. Emera

Emera  (TSX: EMA), the parent company of Nova Scotia Power, is an ideal choice for the risk-averse investor. Today, more than 80% of the company’s income comes from regulated utilities in Nova Scotia, Maine, and the Caribbean. Because these are natural monopolies, Emera is almost guaranteed to earn a respectable return on investment.

Utilities have a reputation for being stodgy companies. Emera’s shareholders aren’t complaining, however, as over the past decade the stock has delivered a return, excluding dividends, of 100%, handily beating the S&P/TSX Composite Index.

What’s more, Emera has boosted its dividend payout to shareholders 10 years in a row at a 7% annual clip. Today, the stock yields 4.4%. That’s one of the highest in the utilities space.

2. Toronto Dominion Bank

Canadian banks have a reputation of being boring investments, but that hasn’t hurt performance. Since the end of the financial crisis in 2009, Toronto Dominion Bank  (TSX: TD)(NYSE: TD) has increased its dividend seven times. If you had bought $100,000 worth of the bank’s shares 10 years ago and reinvested all of your dividends, your shares would be worth about $350,000 today, equivalent to a 16.2% annualized return.

There’s almost certainly more where that came from. Thanks to its United States expansion and strength in wealth management, its earnings are poised to grow by more than 8% annually over the next five years. The company’s dividend could grow even faster given that it pays out only 45% of earnings.

3. Enbridge Income Fund

If I had only one adjective to describe Enbridge Income Fund  (TSX: ENF), it would be dull. However, when you’re talking about investments, that’s a compliment.

Electric power generation, natural gas pipelines, and oil storage facilities tend to be steady businesses. Only a tiny percentage of the company’s earnings are exposed to fluctuations in commodity prices, interest rates, or currency values. You can almost set your watch to the company’s cash flow.

This doesn’t mean lousy returns for shareholders. Over the past decade, Enbridge Income Fund has increased its dividend at a 5% annual clip. Given that new pipelines are capital-intensive and have a huge NIMBY factor, Enbridge can continue cranking out those dividends for decades to come without the worry of competition eating into margins.

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