The TSX Index has plenty of stocks that have been consistently paying dividends and increasing it uninterruptedly over the past several years. So if you plan to add a new passive income stream, here are the three top Canadian stocks that should be a part of your income portfolio.
Fortis
Shares of Fortis (TSX: FTS)(NYSE: FTS) are a must in any income portfolio. Investors can easily rely on Fortis for a regular passive income that could continue to grow with them. Notably, Fortis’ dividends have uninterruptedly increased in the last 47 years. Meanwhile, the utility company expects its dividends to increase by a CAGR of 6% over the next five years.
Fortis’ rate-regulated utility assets generate stellar earnings and predictable cash flows that drove its dividend payments. It owns a portfolio of 10 diversified and high-quality regulated utility businesses that account for the majority of earnings and makes it immune to economic cycles.
Fortis is projecting its rate base to increase at a CAGR of 6% or by $10 billion through 2025, which will drive its earnings and dividends. Meanwhile, acquisitions and expansion of its renewable power business are likely to accelerate its growth. It offers a decent yield of 3.7%, which is very safe.
Enbridge
Speaking of top passive income stocks, Enbridge (TSX: ENB)(NYSE: ENB) crops up first in my mind. It offers a high yield of over 7% and has paid dividends for 66 years in a row. Also, its dividends increased at a CAGR of 10% since 1995.
Enbridge’s strong dividend payments are covered through its diverse cash flow streams. Further, the continued momentum in its core business, improving energy outlook, and contractual framework suggest that the energy infrastructure giant’s future dividends could continue to grow at a healthy pace in the forthcoming years. The company is projecting 5-7% growth in its distributable cash flow per share in the coming years, suggesting that its dividends could rise at a similar rate.
The steady recovery in its mainline throughout, strong growth opportunities in the renewable and gas business, and $16 billion secured capital program is likely to expand its high-quality earnings base, in turn, its future dividends.
Pembina Pipeline
Pembina Pipeline (TSX: PPL)(NYSE: PBA) is another top income stock to rely on. Its highly-contracted business backed by take or pay and cost-of-service framework continues to generate strong fee-based cash flows that drive its dividend payments.
Pembina has paid more than $9.5 billion in dividends since 1997. Furthermore, its annual dividends increased at a CAGR of 4.9% in the last decade. Currently, the company offers a juicy yield of 6.6%, which is very safe. I believe the expected improvement in volumes and average realized prices, investment-grade secured counterparties, growth projects, and backlogs are expected to boost its cash flows, share buybacks, and higher dividend payments.
Furthermore, its exposure to diversified commodities and operating leverage are likely to cushion its earnings. Notably, Pembina stock is also looking attractive on the valuation front. Its forward EV/EBITDA ratio of 10.6 is well below the peer group average and suggests further upside.
