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.

| More on:
Target. Stand out from the crowd

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

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

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Dividend Investors: 2 Top Oversold TSX Stocks to Buy for Total Returns

RRSP investors can pick up top TSX dividend stocks at cheap prices today and get a shot at some attractive…

Read more »

analyze data
Dividend Stocks

2 Safe Dividend Stocks That Could Help You Fight Inflation

A dependable stream of passive income is one way to help offset rising inflation rates. Here are two top dividend…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

Stay Invested in a Recession: Increase Positions in 2 Value Stocks

The suggestion of market analysts is to increase positions in two value stocks if you want to stay invested amid…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Dividend Stocks to Buy as Inflation Surges in Canada

If you're worried about how surging inflation may impact your portfolio, here are three of the best dividend stocks to…

Read more »

You Should Know This
Dividend Stocks

High Inflation: The Good and the Bad for Canadians

Consider tucking away some of your long-term savings in quality dividend stocks like Brookfield Infrastructure in this correction.

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

TFSA Investors: Turn $1,000 Into $10,000 in 10 Years

10-fold growth within a decade is rare but not unheard of. You can capture this growth either by predicting a…

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

1 Oversold REIT Stock to Buy for Safe Dividends

If you're looking for stable dividend income from an oversold stock, this office REIT is a perfect option.

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

3 Cheap Canadian REITs to Buy in 2022

Are you looking for passive income? Start treasure digging in cheap Canadian REITs in this market correction!

Read more »