My 3 Favourite TSX Dividend Stocks Right Now

Investors can achieve peace of mind with these three dividend stocks that will likely continue to pay stable dividends for years for come.

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While growth stocks offer solid appreciation prospects, dividend stocks provide stability. The former are much more volatile, but dividend names witness lower swings resulting in more peace of mind. Market participants often overlook dividend stocks because they can be slow-moving. However, this may be a misguided approach. Canada has several top-quality dividend stocks that offer appealing investment propositions. Here are three of them.

Fortis

Canada’s top utility Fortis (TSX:FTS)(NYSE:FTS) is one of the top dividend stocks on the TSX. It yields a healthy 3.5% and has a long dividend growth streak of 48 consecutive years.

Fortis was incorporated in 1885 with a mere $390 million in assets. Today, it has more than $60 billion in assets and caters to three million customers. It has large regulated electric and gas operations that enable stable earnings, ultimately facilitating consistent dividends.

Stocks like Fortis are less volatile because their earnings do not fluctuate with economic cycles. This earnings predictability bodes well for dividends and stable shareholder returns. As a result, Fortis management expects to increase its per share dividend by 6% annually through 2025.    

Fortis gave away 72% of its net income on average as dividends in the last five years. Such a high payout ratio is not rare among utilities. Utilities generally distribute a large portion of earnings in the form of dividends.

Note that utility stocks are not for everyone. These are low-risk, moderate-return stocks that outperform growth stocks in bull markets. However, they’re ideal for investors who prefer stable passive income and less volatility.

Enbridge

Canada’s energy midstream company Enbridge (TSX:ENB)(NYSE:ENB) is one of the biggest and top-yielding stocks on the TSX. It yields a juicy 6.1% and has increased shareholder payouts for the last 27 consecutive years.

Unlike oil and gas production companies, Enbridge has a stable earnings profile that is less driven by energy commodity prices. That’s why investors can expect stable dividend growth from Enbridge for the foreseeable future.

ENB stock has returned 20% in the last 12 months and 140% in the previous 10 years, including dividends. Enbridge’s large energy pipeline network, stable earnings, and strong balance sheet will likely continue to drive consistent dividend growth in the future.

BCE

Another safe and stable stock that pays reliable dividends is BCE (TSX:BCE)(NYSE:BCE). It currently yields a handsome 5.6%, way higher than TSX stocks on average. Like utilities, telecom companies also earn stable cash flows, irrespective of the market cycles. BCE is the largest Canadian telecom company and could be a great fit for your dividend portfolio.

BCE has grown slowly but steadily for the last several years. In the last decade, its revenues and earnings grew by a compound annual growth rate (CAGR) of 1.8%, lower than the market’s average. In this same period, BCE stock returned 10% CAGR, including dividends, comfortably beating broader markets.

BCE has a strong balance sheet and one of the largest subscriber bases in the country. It aims to invest $5 billion this year, the most by any Canadian telecom company. This is mainly being invested in network infrastructure and the 5G rollout.

By the end of 2022, BCE intends to cover 40% of Canada’s population with its 5G network. Aggressive 5G expansion and investments in its network could bode well for earnings growth in the next few years.

So, if you’re looking for reliable dividends, BCE is an attractive stock, given its earnings and dividend stability.

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 recommends Enbridge and FORTIS INC. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

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