For investors focused on income investing, the stability of a dividend is paramount. While massive yields are attractive, they’re not useful to investors if they’re up for a cut.
That is, it’s hard to build a stream of dependable income with uncertain dividend sources. That’s why many income investors turn to certain blue-chip TSX stocks with amazingly stable dividends.
While they may not offer the largest yields on paper, these stocks typically offer terrific dividend growth over time and unmatched reliability. Usually, these are blue-chip stocks in non-cyclical sectors with a diverse range of revenue sources.
Today, we’ll look at two such TSX behemoths ideal for income investing.
Fortis (TSX:FTS)(NYSE:FTS) is a large and well-diversified utility holding company based out of Canada. It has a range of services it provides to customers across the Caribbean and Central America as well as North America.
Fortis has long been a favourite of Canadian investors focused on dividend investing. It has a great track record for stability, and it’s always been committed to growing its dividend over time.
This is possible due to how Fortis conducts business. It provides its utility services largely through thoroughly regulated contracts. This means its revenue streams are very reliable and predictable.
The result is a rock-solid dividend ideal for income investing. Since Fortis offers such essential services in a very steady manner, investors can bank on its dividend.
As of this writing, FTS is trading at $50.18 and yielding 4.03%. While it’s not the most eye-popping yield, its reliability is a huge positive for income investing.
It’s likely not going to give investors some juicy annual returns in any given year, but for dividend investors it’s a solid and safe pick.
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a massive Canadian banking stock with a growing presence on an international scale. It remains focused on finding ways to drive growth with exposure to new markets and sectors.
For the purposes of income investing, BNS is an attractive bank pick. That’s because it typically offers a large yield relative to its peers with strong underlying financials to support it.
As of this writing, it’s trading at $77.42 and yielding 4.65%. While it’s no secret that many stocks have faced an uphill battle recently, BNS isn’t showing signs of cracking.
In fact, its dividend payout ratio is still only 67.67%. That figure is higher than what BNS typically might carry, but it’s still not anywhere near the danger zone as far as jeopardizing the dividend.
BNS also has access to plenty of liquidity and a strong support cushion in place. For investors looking to add a major bank to their income investing plan, BNS is a solid pick.
Like with FTS, it typically won’t wow its investors with massive jumps in the short run, but over time it has solid growth prospects and a reliable yield.
Income investing strategy
Both FTS and BNS can play an important role in for income investors. They both offer solid dividends backed up by reliable revenue sources.
If you’re looking to add some income investing firepower, be sure to keep these names in mind.
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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 Jared Seguin has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA and FORTIS INC.