High-growth tech stocks generally double investors’ money every few years. But very few of us are comfortable with the underlying risk. Just like superior growth prospects, those stocks offer substantial downside risk as well.
At the same time, mature businesses or dividend-paying stocks offer low-risk average-return prospects for the long term. Many conservative investors, who prefer stability over higher returns, will agree with this deal. Here are three top Canadian dividend stocks that offer handsome dividends and stability for long-term investors.
Midstream energy giant Enbridge (TSX:ENB)(NYSE:ENB) pays a juicy dividend yield of 7% at the moment. It has increased dividends by 10% compounded annually for the last 26 consecutive years, comfortably beating inflation. Notably, the company intends to raise its dividends by 5%-7% per year for the next few years.
It is the earnings stability and balance sheet strength of the company that facilitates such visible dividend growth. Enbridge mainly operates a network of energy pipelines in North America, ensuring predictable, stable cash flows. As a result, its earnings are not significantly hampered by volatile energy commodity prices.
Enbridge stock has delivered an average return of 12% in the last two decades. That’s way trivial against a growth stock. However, the dividend paid and stability it provided during the market downturn is certainly unmatchable. Its striking dividend profile and reliability for the long term make it one of the best defensive stocks.
Telecom giant BCE (TSX:BCE)(NYSE:BCE) is another smart defensive stock pick. It is the biggest telecom company by market capitalization. As the Canadian telecom industry is going through a paradigm shift ahead of the 5G, BCE seems well placed with its strong balance sheet and a large subscriber base.
Telecoms are recession-resilient stocks that earn stable profits in almost all economic scenarios. Stocks like BCE are less volatile against broader markets and thus, offer low-risk to investors. BCE pays stable dividends as well that yield close to 6%. It has increased dividends for the last 16 consecutive years.
The company is well-positioned to increase shareholder payouts for decades to come consistently. Its scale, extensive presence, and a lead in the 5G race should play well for its earnings growth in the next few years. In a nutshell, BCE offers decent total return prospects with its stable earnings and dividend profile.
Another top defensive, dividend-paying Canadian stock is Fortis (TSX:FTS)(NYSE:FTS). Like Enbridge and BCE, Fortis has a stable earnings base that facilitates steady dividends. Electricity and gas distribution services generate stable cash flows for Fortis even in economic downturns.
That’s why it has managed to increase dividends for the last 47 consecutive years. And it might continue to raise shareholder payouts at a similar pace in the future as well.
Fortis distributed 67% of its earnings last year as shareholder payouts. Such large payout ratios are common among utility stocks and are way higher compared to the broad market average.
Fortis yields 3.7% at the moment, in line with the TSX stocks average. Though the yield is not exceptionally superior, its dividend stability stands tall in Canadian markets.
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 Vineet Kulkarni does not hold any position in the stocks mentioned.