While the contagious Delta variant of coronavirus could keep volatility elevated in the market, it is prudent to add a few income stocks to your portfolio to earn steady income amid wild market swings.
While plenty of income stocks are listed on the TSX, I’d suggest investors bet on companies with long dividend payment histories and solid long-term growth prospects.
With reliable income stocks in the backdrop, I have zeroed in on the three best Canadian income stocks that have consistently paid regular dividends for a very long time and have sustainable payout ratios. Moreover, their high-quality earnings base and robust cash flows indicate that these stocks could continue to deliver higher dividend payments in the coming years.
Algonquin Power & Utilities
Speaking of reliable income stocks, let’s begin with Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN). The utility company has rewarded its shareholders with double-digit dividend growth in the last decade. To be precise, Algonquin Power & Utilities has increased its dividends at a CAGR of 10% in 11 years. Currently, it offers a quarterly dividend of US$0.171 per share, translating into a healthy yield of about 4.3%.
I expect the company to continue to increase its dividend at a similar pace on the back of consistent growth in its earnings and cash flows. Its regulated assets and growing rate base will drive its high-quality earnings base.
Overall, its low-risk business and long-term power-purchase agreements will likely support its growth rate and dividend payouts. Further, strategic acquisitions and opportunities in the renewable power business augur well for future growth.
With a dividend payments history of 164 years, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is undeniably an attractive income stock for your portfolio. Currently, Toronto-Dominion Bank pays a quarterly dividend of $0.79 per share, reflecting a decent yield of over 3.8%.
Furthermore, the Canadian banking giant has raised its annual dividend by an average rate of 11% in the last 25 years, which is the highest growth rate among its peers.
Toronto-Dominion Bank’s diversified business, improved credit quality, and robust balance sheet will likely drive its top and bottom line in the coming years. Furthermore, the expected uptick in loan volumes and interest rates, higher deposits, lower provisions, and improving efficiency will likely boost profitability. Thanks to its solid earnings base, I expect Toronto-Dominion Bank to continue to increase dividend payments in the future.
Canadian Utilities (TSX:CU) stock is a must-have in your portfolio if you are looking to generate a steady inflow of income irrespective of economic cycles. Notably, it has the longest record (for 49 consecutive years) of raising dividends among all the publicly traded Canadian companies. Currently, it provides a quarterly dividend of $0.44 per share and a juicy yield of about 5%.
The company’s high-quality regulated assets generate solid earnings and predictable cash flows, which positions it well to enhance its shareholders’ returns through increased dividend payments.
I expect the company to continue to invest in regulated and contracted assets, which will likely boost its earnings growth and, in turn, its future dividend payments. Furthermore, I believe a steady recovery in its energy infrastructure business and cost optimization should cushion its profits.
Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.