3 TSX Dividend Stocks That Should Pay You for the Rest of Your Life

Here’s why stocks such as Emera (TSX:EMA) will continue to pay you dividends in the upcoming decade and beyond.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Dividend stocks continue to generate interest among investors. Despite a volatile and forgettable 2020, investing in quality dividend stocks provides an opportunity to increase your wealth via recurring payouts as well as capital gains over the long term.

Most dividend-paying companies have a steady stream of cash flows that help them maintain or increase payouts over long periods. Here we look at three such stocks that are well-positioned to keep paying you dividends for the rest of your life.

Algonquin Power & Utilities

The first stock on the list is Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN), a Canadian renewable energy and utility company. It owns and operates several regulated gas, water, and electrical utilities and renewable energy power plants in North America.

The company’s focus on renewable energy has allowed it to generate market-beating returns in the last decade. Algonquin stock is up 440% since October 2009. Despite its stellar returns, it has a forward dividend yield of 4.3%.

Algonquin will continue to benefit as electric grids are transitioning to emissions-free sources of energy. Its low-risk business is supported by regulated assets that generate robust cash flows. Further, its renewable energy business is backed by long-term purchase agreements that have been indexed to inflation.

Algonquin has managed to increase dividends at an annual rate of 10% in the last decade and it remains a top pick for income investors.

TransAlta Renewables has a dividend yield of 5.6%

Another renewable energy giant is TransAlta Renewables (TSX:RNW), a company that also pays shareholders a monthly dividend. The stock has gained over 60% in the last five years and has a forward yield of 5.6%. It has increased dividends at an annual rate of 4% since 2013 and pays dividends of $0.07833 a month or $0.90 per share per year.

The company owns and operates a portfolio of 13 hydro facilities, 19 wind farms, and one natural gas plant in Canada. Its total electricity-generating capacity is 2,555 megawatts.

In Q2, TransAlta increased adjusted EBITDA by 3.6% to $115 million and funds from operations rose 12.5% to $90 million. It generated $71 million from operating activities in Q2 which indicates year-over-year growth of 36%. The company also ended Q2 with $498 million in liquidity.

TransAlta has maintained guidance for 2020 and expects EBITDA between $445 million and $475 million, up from $438 million in 2019.

Emera is also a forever dividend stock

The third stock in this list that can easily sustain and increase dividend payouts is Emera (TSX:EMA), a company that generates the majority of earnings from its rate-regulated business. Emera is a top dividend stock that has grown dividend yields at an annual rate of 6% in the last two decades. The stock now has a forward yield of 4.5%.

Emera has outlined a $7.5 billion capital growth program, which means its rate base should grow at an enviable pace over the years, allowing it to support higher payouts. The management expects rate base to increase at an annual rate of 8% until 2022, while its dividends are forecast to grow between 4% and 5% through 2022.

The Foolish takeaway

If you invest $25,000 in each of these stocks, you can generate $3,500 in annual dividend income. In case the companies increase dividends at an annual rate of 5% in the next 10 years, annual dividend income will increase to $5,400 after accounting for re-investments.

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.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

More on Dividend Stocks

A plant grows from coins.
Dividend Stocks

2 Young TSX Stocks You’ll Be Glad You Bought in 10 Years

Youth means nothing when you plan to hold strong companies long term. These two TSX stocks should therefore be first…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

Is it a Trap? 3 TSX Stocks With Ultra-High Dividend Yields 

Who doesn’t love dividends? But the high-interest rate environment makes ultra-high dividends unsustainable. Are these stocks a value trap?

Read more »

Value for money
Dividend Stocks

3 Value Stocks for Superior Returns in 2023

Given their solid underlying businesses, stable cash flows, high dividend yields, and attractive valuations, these three undervalued TSX stocks could…

Read more »

Financial technology concept.
Dividend Stocks

2 TSX Value Stocks to Buy for Peace of Mind (and a Crazy-Good Deal)

2 TSX stocks that could outperform in the long term.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 of the Best Canadian Dividend Stocks I’d Buy Before March 2023 Ends

Here are two of the best Canadian dividend stocks you can buy on a dip in March 2023 to hold…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

3 Value Stocks That Smart Investors Should Seriously Consider

You get it all with these stable stocks. They may have less growth now, but will have incredibly high growth…

Read more »

Chalk outline of two arrows pointing in opposite directions
Dividend Stocks

2 TSX Stocks I’d Buy Instead of Sitting on Cash

These two TSX stocks are my top choices if you want companies that are going to recover quickly after a…

Read more »

Canadian Dollars
Dividend Stocks

Want $1,000 Per Quarter in Passive Income? 2 TSX Stocks That Do the Job

Are you looking to earn $1,000 in passive income each quarter? These two TSX dividend stocks can help you achieve…

Read more »