5 of the Best TSX Stocks for Predictable Passive Income

Dividend-paying stocks are one of the best ways to generate a predictable passive income stream.

| More on:
Woman has an idea

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Top dividend-paying stocks are one of the best ways to generate a predictable passive income stream. Investors looking for a growing passive income stream could consider buying these five TSX stocks. These TSX stocks have paid and increased their dividends for a very long period. Further, their solid fundamentals and resilient cash flows suggest that these Canadian companies could continue to grow their dividends at a decent pace in the coming years. 

Canadian Utilities 

Canadian Utilities (TSX:CU) has the longest track record of increasing its dividends. To be precise, it has raised it for 49 consecutive years and is likely to increase it further, thanks to its growing high-quality earnings base. Canadian Utilities earns all of its earnings from the regulated and contracted assets that generate predictable and resilient cash flows and support its dividend payouts. 

It offers a solid yield of over 5% and continues to invest in the regulated and contracted assets, implying that investors could rely on its dividends. The companies growing high-quality earnings base and cost efficiencies are likely to drive its future earnings, in turn, its dividends. 

Fortis

Fortis (TSX:FTS)(NYSE:FTS) raised its dividends for 47 years in a row. Meanwhile, the utility giant predicts 6% annual growth in its dividends over the next five years. Its low-risk business, diversified assets, and growing dividends make it a must-have stock for a predictable passive income. 

Fortis owns about 10 regulated utility assets that generate resilient earnings and cash flows. Meanwhile, it projects its rate base to increase by 6% annually through 2025 and reach $40 billion. Its growing rate base, conservative business mix, and growth opportunities in the renewable segment suggest that Fortis’ payouts are sustainable in the long run. Also, it will continue to boost its shareholders’ returns through increased dividends.

Enbridge  

Enbridge (TSX:ENB)(NYSE:ENB) has been increasing its dividends by about 10% annually for the last 26 years in a row. Furthermore, it has been paying dividends for nearly 66 years. Its solid dividend payment history, highly diversified cash flow streams, sustainable payout ratio, and a high yield of over 7% make it a top income stock for long-term investors. 

I believe the continued momentum in its core business, recovery in mainline volumes, and a $16 billion diversified secured capital program positions its well to deliver robust distributable cash flows in the coming years. Enbridge expects a 5-7% growth in its distributable cash flow per share in the future years, implying that its dividends could increase at almost the same rate.

TC Energy

TC Energy (TSX:TRP)(NYSE:TRP) increased its dividends by about 7% annually in the last 21 years and is offering a high yield of 5.9%. Its regulated and contracted have helped it to deliver strong cash flows and drove its dividends higher. 

Thanks to its low-risk business and predictable cash flows, TC Energy projects 5-7% growth in its annual dividends in the coming years. Its multi-billion-dollars secured capital program, strong development portfolio, high-quality assets, and growing dividends make it a solid passive income stock. 

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) has increased its dividends by 10% annually in the past decade. Further, it projects 10% growth in its dividends for 2021. Algonquin Power & Utilities’ sold dividend growth is backed by its high-quality assets, long-term contracts, and continued rate base. 

It projects 11% annual growth in its rate over the next five years. Meanwhile, its adjusted EBITDA and earnings are likely to mark double-digit growth during the same period. I believe its low-risk and diversified business, growing regulated asset base, and solid earnings growth provide a strong base for future growth.

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 FORTIS INC.

More on Dividend Stocks

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Dots over the earth connecting the world
Dividend Stocks

3 of the Top-Growing Stocks on Earth

Market volatility remains high in Q3 2022, but it’s easy to identify the top-growing stocks on Earth.

Read more »

Profit dial turned up to maximum
Dividend Stocks

1 Undervalued Canadian Dividend Stock to Buy for TFSA Passive Income and Total Returns

This cheap Canadian energy stock provides an attractive dividend yield for TFSA passive income and a shot at some big…

Read more »

money cash dividends
Dividend Stocks

Want Passive Income? 1 TSX Stock for $8/Day in Dividends

If you need cash right away, then this TSX stock can make you passive income from a stable dividend that…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

My 3 Favourite TSX Dividend Stocks Right Now

Canadian dividend stocks make for great long-term buy-and-hold investments.

Read more »

value for money
Dividend Stocks

3 Incredibly Cheap Dividend Stocks to Buy for Dependable Passive Income

Now is an excellent time to load up on Canadian dividend stocks. Here are top picks that are all trading…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Simple TSX Stocks to Buy With $25 Right Now

Canadians with capital of as low as $25 can purchase three simple stocks right now and earn recurring passive income…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

2 No-Brainer U.S. Stocks for Investors in August

Here are two undervalued U.S. stocks to diversify your investment portfolio. They both pay safe and growing dividends!

Read more »