The way to generate a reliable passive-income stream in the stock market is through investing in dividend-paying stocks. However, not all dividend stocks are a reliable bet. It would be best to focus on companies with good earnings growth potential, strong cash flows, and resilient businesses that could help survive the different economic cycles.
So, if you are looking to generate stable passive income through dividends, consider buying these top TSX stocks.
Canadian Utilities
Shares of the Canadian Utilities (TSX: CU) are a must-have for your passive-income portfolio. The utility giant is known for its stellar dividends, which keep growing with you. Canadian Utilities has been uninterruptedly increasing its dividends for the past 48 years, which is incredible. Canadian Utilities currently pays a quarterly dividend of $0.44 per share, reflecting an annual yield of 5.1%.
Its high-quality earnings base backs the company’s robust dividend payments. The company generates about 95% of its total earnings from the rate-regulated utility assets. Moreover, the remaining 5% of the earnings come from energy infrastructure businesses with long-term contractual arrangements.
As part of the essential services, Canadian Utilities’s business remains immune to the economic cycles and generates high-quality earnings and predictable cash flows. The company’s continued investments in contracted and regulated earnings base support its payouts.
Canadian Utilities projects to invest $3.5 billion from 2020 to 2022 in regulated and long-term contracted assets that are likely to strengthen its earnings and drive its future dividends.
Algonquin Power & Utilities
Shares of Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) are another reliable bet for stable passive income. Like Canadian Utilities, Algonquin Power & Utilities generates most of its earnings from the regulated utility business. Its renewable power business also remains highly stable, thanks to the long-term power-purchase agreements with indexation for inflation.
Thanks to its predictable cash flows, Algonquin Power & Utilities has increased its dividends by 10% annually in the last decade. Moreover, with its high-quality earnings and continued expansion of its regulated utility assets and renewable power business, Algonquin Power & Utilities could continue to boost shareholders’ returns in the coming years.
Currently, Algonquin Power & Utilities offers a quarterly dividend of $0.16 per share, reflecting an annual yield of about 4%.
TC Energy
Investors eyeing solid passive income through dividends should keep TC Energy (TSX: TRP)(NYSE: TRP) on their radar. TC Energy’s business remained relatively immune to the volatility in crude prices, which is encouraging. Its assets continue to record a high utilization rate.
The energy infrastructure company generates most of its earnings from businesses that are either rate regulated or have long contracts, which support its cash flows and payouts. Over the years, TC Energy’s dividends have increased at a high-single-digit rate. Moreover, the company projects it to grow by 8-10% in fiscal 2021. Further, the company projects a 5-7% annual increase in dividends after fiscal 2021.
TC Energy’s continued investment in the high-quality earnings base and a strong secured capital program suggests that it could continue to return a boatload of cash to its investors in the coming years.
