3 Dividend Stocks to Earn Worry-Free Passive Income

These Canadian companies have stellar dividend payment history and strong businesses to support future payouts.

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

Shares of Enbridge (TSX:ENB)(NYSE:ENB)Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and Fortis (TSX:FTS)(NYSE:FTS) are reliable investments for investors planning to create a portfolio with stocks that provide a worry-free income.  

Let’s look at why these three TSX stocks can help generate a solid passive income amid all market conditions. 

Toronto-Dominion Bank

Toronto-Dominion Bank is undoubtedly one of the top stocks to generate a worry-free passive income for decades, and there are good reasons for that. It’s worth noting that the bank has a stellar dividend payment history (164 continuous years). Moreover, from 1995, its dividend has grown at a CAGR of 11% — the highest growth rate among top Canadian banks. 

Toronto-Dominion Bank’s solid dividend payments are supported by its ability to grow consistent profit. The bank’s adjusted earnings have a CAGR of 9.5% in the last five years, which is encouraging. Meanwhile, it is well positioned to deliver strong earnings in the coming years, benefitting from economic recovery and expansion into attractive growth markets.   

Further, an increase in loans and deposit volumes, higher interest rate, strong credit performance, and improving efficiency augur well for future earnings and dividend growth. Overall, its diversified revenue base, strong balance sheet, and ability to grow earnings indicate that Toronto-Dominion Bank could continue to enhance its shareholders’ returns in the coming years. 

Enbridge

This energy infrastructure company is an obvious choice for investors seeking reliable passive income for decades. Enbridge has paid dividend for about 67 years. Further, since 1995, its dividend has grown at a CAGR of 10%, which is encouraging. 

Its diverse cash flow streams, strength in the base business, and contractual arrangements support its distributable cash flows and dividend payments. Further, its multi-billion-dollar secured capital projects will boost its earnings and cash flows, which is positive for future payouts. Moreover, recovery in mainline volumes, expansion of renewables capacity, strategic acquisitions, and inflation-protected revenues bode well for growth. 

Enbridge expects its distributable cash flow per share (DCF/Share) to increase by 8% in 2022. Further, it projects 5-7% growth in its DCF/share through 2024. This signifies that Enbridge’s future dividend could increase at a rate similar to DCF)/share. While Enbridge stock has gained quite a lot from its lows, it still offers an attractive yield of more than 5.9% at current levels. 

Fortis 

Fortis is a Dividend Aristocrat that has raised dividend for 48 consecutive years. Further, Fortis sees about 6% annualized growth in its dividend through 2025 and offers a well-protected yield of 3.4% for reliable passive income. 

Its diverse and regulated businesses generate resilient and predictable cash, which drives its payouts. Further, its investment into infrastructure, growing renewables capacity, and opportunistic acquisitions augur well for growth. Fortis expects its rate base to grow at a CAGR of 6% in the medium term, which will expand its high-quality earnings base and drive higher dividend payments. 

Overall, its conservative business, high-quality regulated assets, stellar dividend payment history, and visibility over future cash flows support my bullish outlook on Fortis stock and make it a top bet to generate consistent passive income. 

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 recommends Enbridge and FORTIS INC.

More on Dividend Stocks

Money growing in soil , Business success concept.
Dividend Stocks

Top Canadian Dividend Stocks to Buy and Hold for the Long Term

These Canadian companies have been paying dividends for more than four decades and have been consistently growing the same.

Read more »

edit Safety First illustration
Dividend Stocks

How to Generate Inflation-Proof Passive Income

Inflation-resistant, passive-income stocks like Enbridge (TSX:ENB)(NYSE:ENB) should be on your list.

Read more »

Increasing yield
Dividend Stocks

Dividend Chasers: 3 Stocks With Yields of 8% or More

Three TSX stocks are appetizing for investors whose strategy is to chase after dividend beasts.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

Become a Laidback Landlord Easily With Canadian REITs

Do you want to continue earning rental income but reduce your workload? You should dig deeper into REIT investing!

Read more »

data analyze research
Dividend Stocks

Stocks for Beginners: 3 Reliable Dividend Stocks to Buy Now

The best time to start investing is in a market correction. If you are a new investor, here are three…

Read more »

funds, money, nest egg
Dividend Stocks

Canadian Retirees: 2 Top TFSA Stocks for Tax-Free and Passive Retirement Income

Invest in these two top stocks to enjoy high-yielding, tax-free dividend income in your TFSA amid the market pullback.

Read more »

financial freedom sign
Dividend Stocks

Generate Enough Passive Income to Retire

Looking to generate a stream of passive income to retire on? Here are several stocks to start building out your…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Stocks to Hold for a Reliable Source of Passive Income

Are you looking for a way to produce a reliable source of passive income? Hold these three stocks!

Read more »