2 Dividend Aristocrats on the TSX to Buy and Hold Forever

Canada’s large-cap giants such as Enbridge (TSX:ENB) and Canadian Utilities (TSX:CU) have been among the top dividend bets in the last few decades.

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Dividend-paying companies continue to be attractive to investors. These stocks help to create a passive source of recurring income and identifying blue-chip stocks can help you generate significant wealth over time. Here we look at two Dividend Aristocrats on the TSX or companies that have managed to increase payouts for 25 straight years or more.

Increasing dividends for such a long time indicates the company has strong fundamentals. Generally, dividends are among the first cuts that organizations eye in a market slowdown. In 2020, several companies in the energy and retail space cut or entirely suspended dividends shortly after the COVID-19 pandemic decimated the global economy.

Enbridge is a diversified energy infrastructure giant

It is difficult to exclude Enbridge (TSX:ENB)(NYSE:ENB) from your list of dividend stocks given its juicy forward yield of 8.9%. Canada’s energy infrastructure heavyweight has increased dividends at an annual rate of 11% since 1995.

The company aims to keep its payout ratio within 65% allowing it to increase dividends at an annual rate of between 5% and 7% in the foreseeable future. Enbridge has an investment-grade balance sheet which means it will continue to generate a steady stream of cash flows making a dividend cut highly unlikely.

Enbridge has shown solid resiliency in the last few months where oil prices have plunged to multi-year lows. It also continues to invest heavily in the renewable energy space which will be a long-term revenue driver for the company.

Enbridge transports 65% of the crude oil and liquids exported from Canada and 19% of natural gas consumed in the U.S. Despite a decline in volume, it increased distributable cash flow (DCF) by 5.5% in Q2 and maintained guidance for 2020.

Canadian Utilities has a forward yield of 5.6%

The next stock on the list is Canadian Utilities (TSX:CU), a company that has increased dividends for 47 consecutive years. Canadian Utilities provides services in the utilities, energy infrastructure, and retail energy verticals.

It generates around 95% of sales from regulated utilities and the rest come from contracted assets. With over $20 billion in assets, CU is one of the safest dividend stocks on the TSX. Its rate-regulated business ensures low volatility and a regular income stream. Further, its steady rate base growth and a focus on cost efficiencies have enabled the company to increase dividends at a steady rate.

In the two decades, CU has increased dividends at an annual rate of 6.6%. For example, if you invested $10,000 in this stock back in 2000 you could have purchased 1,081 shares. If you exclude dividends, your investment would have ballooned to $35,000 today.

CU paid a dividend of $0.45 per share in 2000 which means you would have generated $486.5 in dividend payouts given your investment of $10,000 and these payments would have risen to $1,882/year in 2020.

CU has the longest record of dividend increases among Canadian companies. Its recession-proof business and steady cash flows make Canadian Utilities one of the top dividend bets for 2020 and beyond.

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.

The Motley Fool owns shares of and recommends Enbridge. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

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