3 of the Best Dividend Stocks in Canada to Buy in May 2021

Investing in quality dividend-paying stocks with strong fundamentals and a robust balance sheet like Enbridge (TSX:ENB) will help you derive a steady stream of recurring income.

Target. Stand out from the crowd

Image source: Getty Images

Dividend stocks remain a top bet for investors looking for a predictable stream of income as well as steady gains over time. While dividend payments are not guaranteed, it is unusual to see a company suspending these payouts unless absolutely necessary. We’ll take a look at three Canadian dividend-paying stocks with strong business models that can sustain and increase these payouts across business cycles.

Enbridge

The first stock on my list is Enbridge (TSX:ENB)(NYSE:ENB), a diversified midstream energy company with a tasty dividend yield of 7%. Enbridge’s expanding base of cash-generating assets has allowed it to increase dividends at an annual rate of 10% since 1995. Around 90% of its EBITDA is backed by long-term contracts, making the company immune to fluctuating commodity prices.

While the renewable energy business accounts for just 3% of total revenue, Enbridge has several large offshore wind farm investments in Europe that will help it gain traction in this rapidly expanding market.

Enbridge aims to keep its distributable cash flow payout ratio below 70%. In the next few years, it expects to increase DCF per share between 5% and 7%, which will help it increase dividend payments over time.

Analysts tracking the stock have a 12-month average target price of $52.18, which is 15% above the current trading price. After accounting for its forward yield, total returns will be close to 23%.

Fortis

Another dividend-paying giant in Canada is Fortis (TSX:FTS)(NYSE:FTS). Valued at a market cap of $26 billion, Fortis stock also has a forward yield of 3.7%. The company aims to increase its rate base by 6% annually from $30.5 billion in 2020 to $40 billion in 2025. This also suggests Fortis will be able to increase dividend payouts going forward — something it has done for 47 consecutive years.

In the first quarter of 2021, Fortis reported adjusted net earnings of $360 million or $0.77 per share compared to earnings of $0.68 per share in the prior-year period. Fortis is a recession-proof stock and derives most of its earnings from regulated operations that are stable and low-risk while also providing cash flow visibility. Going ahead, Fortis aims to increase dividends at an annual rate of 5% in the medium term.

Analysts tracking the stock have a 12-month average target price of $59, which is 7.7% above the current trading price. After accounting for its forward yield, total returns will be close to 11%.

Brookfield Renewable Partners

The final stock on this list is Brookfield Renewable (TSX:BEP.UN)(NYSE:BEP). In the first quarter of 2021, Brookfield Renewable generated $257 million, or $0.40 per share, in funds from operations, a rise of 33% year over year.

The clean energy giant continues to accelerate its capital-recycling program. Earlier this year, it agreed to sell over $850 million of assets that include mature onshore wind portfolios in Ireland and the United Kingdom. These asset sales enabled Brookfield to end the quarter with $3.4 billion in liquidity as well as with an investment-grade credit rating. A robust cash balance will allow Brookfield Renewable to pursue accretive acquisitions and multiple development projects in 2021 and beyond.

Brookfield Renewables has been a solid wealth creator for long-term investors. The stock has a forward yield of 3.6% and expects to return around 12% annually to shareholders.

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 »