Investors eyeing higher and secure yields amid a lower interest rate environment could consider buying stocks of Enbridge (TSX:ENB)(NYSE:ENB), Pembina Pipeline (TSX:PPL)(NYSE:PBA), TC Energy (TSX:TRP)(NYSE:TRP), and NorthWest Healthcare Properties REIT (TSX:NWH.UN).
These Canadian companies offer high yields and generate resilient cash flows, implying that their yields and future payouts are safe.
Enbridge stock is yielding about 7.6% at the current price levels, which is very safe. Its more than 40 diversified cash flow streams, cost and productivity improvements, and incremental EBITDA from the secured projects are likely to drive its earnings and cash flows and support its higher dividend payments.
It has raised its dividends for 26 years in a row and could continue to hike it further in the future, thanks to the strength in its core business and recovery in mainline volumes. Enbridge projects its DCF (distributable cash flow) per share to increase by 5-7% over the next three years, implying that its dividends could rise at a similar pace.
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Energy infrastructure giant Pembina Pipeline has consistently maintained and raised its dividend for more than two decades. Meanwhile, its dividends have grown at an average annual rate of 4% in the last 10 years. Pembina’s robust dividend payments are supported through its fee-based cash flow, which continues to grow at a healthy pace.
The company owns highly diversified and contracted assets that generate strong fee-based cash flows. Meanwhile, its payout ratio is sustainable in the long run. The company projects high volumes and pricing and growing backlogs to support its adjusted EBITDA growth in 2021. Meanwhile, contractual arrangements and new projects are expected to support its future cash flows. Pembina pays monthly dividends and is yielding about 7.3%.
TC Energy’s regulated and contracted assets generate high-quality earnings and cash flows that drive its dividend payments. Its dividends increased at a CAGR (compound annual growth rate) of 7% in the last 21 years. Meanwhile, TC Energy projects 5-7% growth in its dividends in the future.
TC Energy derives about 95% of its adjusted EBITDA from assets that are regulated or have long-term contracts, implying that its earnings and cash flows could continue to increase at a decent pace in the coming years. Further, with more than $8 billion worth of projects under development and organic growth opportunities, TC Energy could continue to boost its shareholders’ returns through higher dividend payments. The company pays a quarterly dividend of $0.87 a share, reflecting a yield of 6.1%.
NorthWest Healthcare Properties
NorthWest Healthcare Properties’s low-risk and diversified healthcare real estate portfolio positions it well to consistently boost its shareholders’ returns through regular dividend payments. Its occupancy rate remains high, while the majority of its tenants are backed by governments.
Its long lease expiry term of 14.5 years reduces vacancy risk and adds visibility over the future cash flows. Further, about two-thirds of its rents are inflation-indexed, which lowers price risk. Its focus on deleveraging its balance sheet, accretive acquisitions, and geographic expansion bode well for growth. Like Pembina, it pays monthly dividends and offers an annual yield of 6.1%.
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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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS and PEMBINA PIPELINE CORPORATION.