The Motley Fool

Passive Income: 4 Top TSX Stocks to Buy Now

Make a choice, path to success, sign
Image source: Getty Images

If you are building a portfolio, it’s wise to add a few high-quality dividend stocks. Dividend-paying stocks not only provide regular passive income but also enhance the overall returns over time. Furthermore, dividend-paying stocks are relatively stable, adding a safety net to one’s portfolio. 

Keeping top TSX dividend stocks in mind, I have zeroed in on Toronto-Dominion Bank (TSX:TD)(NYSE:TD)Fortis (TSX:FTS)(NYSE:FTS)Enbridge (TSX:ENB)(NYSE:ENB), and Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN)

All of these companies have a long dividend payment history. Moreover, these companies have consistently hiked dividends thanks to their resilient cash flows. Also, their payouts are safe and sustainable in the coming years.

Toronto-Dominion Bank has paid dividends for 164 years

Toronto-Dominion Bank could be a solid addition to your passive income portfolio. It has been paying dividends for 164 years. Meanwhile, its dividend has increased at a compound annual growth rate (CAGR) of 11% in the last two and a half decades. 

Its diversified business, volume growth, and improved credit performance position it well to consistently deliver strong earnings that support dividend payouts. Furthermore, its robust balance sheet, strong deposits base, lower credit provisions, improving macro environment, and expense management augur well for future growth. At current price levels, Toronto-Dominion currently offers a dividend yield of 3.67%. 

Enbridge offers a dividend yield of 6.8%

Enbridge is another reliable bet if you seek to generate a consistent passive income. It has paid regular dividends since 1953 and raised it at a CAGR of 10% in the last 26 years. Enbridge’s diverse income streams, contractual framework, and sustained momentum in core business support its higher dividend payments. 

I believe improved energy outlook, revival in mainline volumes, and higher asset utilization will likely support its growth. Meanwhile, its $17 billion secured capital growth program, opportunities in the renewable segment, and cost-saving initiatives will likely cushion its earnings and support higher dividend payments. Currently, Enbridge yields at about 6.8%. 

Fortis raised its dividend for 47 consecutive years 

Fortis is another top-quality Canadian stock for a reliable income. Notably, it has increased its dividend for 47 years and expects to grow it by 6% annually over the next five years. 

Its low-risk business, diversified utility assets, and rate base growth position it well to deliver resilient cash flows in the coming years, which could drive its dividend. Further, increased retail electricity sales and focus on reducing operational costs bode well for future growth. Also, its focus on increasing renewable power-generation capacity and strategic acquisitions are likely to accelerate growth. Currently, Fortis pays a quarterly dividend of $0.505 a share, translating into a yield of 3.4%. 

Algonquin hiked its dividend at a CAGR of 10%

I’ll wrap up with Algonquin stock, which has consistently enhanced its shareholders’ value. The utility company’s earnings have grown at a healthy pace over the past decade. Meanwhile, it has increased its dividend at a CAGR of 10% in the last 11 years. 

Looking ahead, I believe its low-risk business and regulated utility assets could continue to drive its cash flows. Its long-term power-purchase agreements, rate base growth, strategic acquisitions, and robust growth opportunities in the renewable business could bolster its growth rate and support future dividend payouts. At current price levels, Algonquin offers a healthy yield of about 4.4%. 

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.