3 TSX Dividend Stocks to Buy Right Now!

Investing in quality dividend-paying companies such as Fortis and Enbridge can help you create a passive stream of recurring income.

| More on:
funds, money, nest egg

Image source: Getty Images

Dividend stocks remain a top investment choice for obvious reasons. A company with a sound business model and strong fundamentals that pays a dividend provides investors an opportunity to earn a steady stream of recurring income as well as benefit from long-term capital gains. We’ll look at three dividend-paying stocks on the TSX that you should buy right now.

Enbridge has a dividend yield of 7.4%

The first stock on this list is energy heavyweight Enbridge (TSX:ENB)(NYSE:ENB), which has a forward yield of 7.4%. Enbridge is a Dividend Aristocrat and has increased its payout at an annual rate of 10% since 1995.

ENB recently increased its dividends by 3%, despite a challenging 12-month period, as the energy sector grappled with falling demand and lower oil prices. However, Enbridge has a robust contractual-based business model that allows it to generate predictable cash flows across economic cycles.

The company expects to increase distributable cash flow between 5% and 7% in the next few years, which means investors can expect further dividend increases in the future. Enbridge’s gas transmission and distribution operations are regulated and its liquids pipelines are fully utilized.

Its diversified base of cash-generating assets makes ENB a top dividend stock to buy and hold for the upcoming decade.

Fortis has a forward yield of 3.9%

Another Canadian giant on the TSX is utility company Fortis (TSX:FTS)(NYSE:FTS), a stock that has a forward yield of 3.9%. The utility behemoth continued to experience higher residential sales, which were offset by lower commercial and industrial sales amid the pandemic.

In 2020, around 83% of revenue was derived from residential sales, which are rate regulated. In Q4, retail sales were up 1% year over year due to favourable weather in Arizona. This was offset by a 3% revenue decline in the company’s Other Electric segment due to reduced tourism activity in the Caribbean.

Fortis invested $4.2 billion into its energy systems last year, which was $400 million higher compared with 2019, increasing its rate base by 8%.

Last September, Fortis introduced a five-year capital plan amounting to $19.6 billion. This reflects around $4 billion of annual investment in utilities. The company CEO confirmed, “Virtually all of our planned investments are regulated and consists of a diverse mix of highly executable, low risk projects needed to maintain and upgrade our energy infrastructure.”

The above-mentioned capital plan will help Fortis grow its rate base from $30.5 billion in 2020 to $40 billion by 2025, indicating an annual growth rate of 6%. Fortis is another stock that will keep growing its dividends, as it has done for the last 48 years.

Algonquin Power & Utilities

The final stock on the list is Algonquin Power & Utilities, a company that has a forward yield of 4%. AQN has a portfolio of high-quality utility assets that has enabled the company increase earnings and revenue at a fast clip. This, in turn, has allowed Algonquin investors to derive capital gains of over 90% in the last five years.

AQN expects its rate base to increase at a double-digit rate in the upcoming years, which will allow it to improve its top line and cash flows over the long term and support consistent dividend increases.

The Foolish takeaway

Investing $5,000 in each of these companies will help you generate $765 in annual dividend payments. If these TSX companies increase payouts at an annual rate of 7% in the next 10 years, your annual dividend income will increase to $1,500 by the end of the forecast period.

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. The Motley Fool recommends FORTIS INC. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »