3 Canadian Dividend Stocks to Buy Hand Over Fist

Canadian National Railway, Enbridge, and Fortis are three of the best Canadian dividend stocks you can buy.

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Dividend stocks can be valuable sources of income, but the best dividend stocks can also be fantastic ways to build wealth over time. Here are three Canadian dividend stocks to buy hand over fist.

Canadian National Railway

For many years, Canadian National Railway (TSX:CNR)(NYSE:CNI) has been regarded as superior in terms of operating ratios. CNR has been working to increase its margins continuously. The company also owns railroad assets of unrivalled quality.

Because railroads are so hard to duplicate, CNR has a solid economic moat. As a result, you can anticipate rising cash flows every year. In addition, there isn’t a more effective way to move goods than by train. You may always wait for a downturn to buy some CNR shares, which is a benefit. When we consider railroads as desirable investments, there is always a favourable circumstance around the bend.

Finally, the Keystone XL pipeline’s cancellation has shifted more oil transportation to railroads. With this wind at its back, CNR has benefited.

The Kansas City Southern Railroad was the subject of a bidding war in 2021 between CNR and CP. Long-term investors received rich rewards when the CNR merger collapsed, and the company announced a renewed focus on efficiency. The stock value of the company increased dramatically.

Since 1996, CNR has consistently raised its dividend each year. While rewarding shareholders with sizable dividend payments, the management team makes sure to use a significant portion of its cash flow to maintain and enhance railways.

CNR has a stellar dividend track record and low payout rates. Even though the company may occasionally experience difficulties, the dividend payment will not be impacted. There will likely be more high single-digit dividend hikes in the future. The dividend yield is close to 2%.

Enbridge

Enbridge’s (TSX:ENB)(NYSE:ENB) customers sign transportation agreements that last 20–25 years. It is already in an excellent position to gain from the Canadian oil sands’ resurgent profitability, because its Mainline encompasses 70% of the country’s pipeline system.

The demand for Enbridge’s pipelines increases along with production.

After the merger with Spectra, natural gas transportation will make up around a third of its revenue. There are a few projects that Enbridge is considering or developing. In particular, for its Line 3 and Line 5 projects, it must engage with regulators. Both initiatives are progressing gradually but surely.

The demise of TC Energy’s Keystone XL pipeline increases demand for Enbridge’s liquid pipelines. Thanks to their investments in renewable energy, Enbridge now has a greener focus. The stock is a solid contender for any retirement portfolio, because it has a yield of over 6%.

The company has increased dividends for 26 years and paid dividends for 65 years. The current hefty yield of 6.4% makes up for the fact that dividend growth won’t likely be as generous as it has been over the past three years (10%/year). To allow for capital expenditures (capex), management expects to distribute 65% of its distributable cash flow.

Enbridge’s management anticipates a 5-7% increase in distributable cash flow. Consequently, you should expect a comparable dividend growth rate.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) has had robust and steady growth in its core business due to its aggressive investment over the past few years. As it continues to grow, Fortis’s sales should increase as well. The company has generated steady cash flows thanks to the strength of its Canadian-based businesses, resulting in four decades of dividend payments.

The company has a $19.6 billion capital-investment plan for the five years from 2021 to 2025. Its capex plan will only be 33% debt financed. The majority — nearly two-thirds — will come from operating cash flow. Most of its acquisitions are probably going to take place in the U.S.

Increasing its exposure to renewable energy from 2% of its assets in 2019 to 7% in 2035 is another target we appreciate from Fortis. Although the dividend yield of about 3.70% isn’t particularly great, there is a cost to such a high-quality dividend generator.

Management raised the dividend by 6% in 2019 and 2020 and said it would do so yearly until 2025. 

Fortis is one of the exclusive group of Canadian companies that can say that they have consistently raised the dividend for 48 years, making it one of the top stocks to buy.

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 Stephanie Bedard-Chateauneuf has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway, Enbridge, and FORTIS INC. The Motley Fool has a disclosure policy.

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