3 Dividend Champions Yielding Up to 5%

These “boring” stocks are surprisingly profitable.

| More on:
The Motley Fool

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

TFSA Investors: 2 Dividend-Paying Mortgage Stocks to Boost Your Income in 2023

TFSA investors can allocate their new $6,500 contribution limits to two high-yield mortgage stocks to boost their tax-free incomes in…

Read more »

stock analysis
Investing

2 Safe Stocks I’m Buying Hand Over Fist Right Now

Although there is still a tonne of uncertainty about the economy heading into 2023, here are two safe stocks to…

Read more »

dogecoin is a speculative investment
Investing

Man’s Best Friend: A Retail Stock That Weathers Recession

Pet care could be recession resistant, so Pet Valu (TSX:PET) should be on your radar.

Read more »

oil and natural gas
Energy Stocks

Better Buy: Suncor Energy Stock or Canadian Natural Resources

Suncor and Canadian Natural Resources are generating strong profits. Is one undervalued?

Read more »

Arrowings ascending on a chalkboard
Dividend Stocks

3 TSX Stocks With Dividends That Outpace Inflation

Investors that worry about losing buying power due to inflation could put money into these three stocks! They’re known for…

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

Dividend Seekers: Which of These 3 TSX Energy Stocks Is a Better Buy?

Which is a better bet among TSX energy bigwigs?

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Top Value Stocks to Buy in December 2022

Stocks such as Bank of Montreal and NFI Group are trading at attractive and cheap valuations in 2022.

Read more »

edit Person using calculator next to charts and graphs
Investing

4 Things to Know About Algonquin Stock in December 2022

Algonquin Power & Utilities (TSX:AQN) stock is down, but did you know these four key facts about it?

Read more »