It’s never too late to set yourself up with a solid income stream. The good thing about setting yourself up now is that dividend stocks have been hit, and have more attractive valuations today than they’ve had in a long time. Yet, many of them are generating an even higher income stream that remains safe and reliable.
The safety afforded by these dividend stocks sets us up for growing income for the long term. It also sets us up for a pretty stress-free investing experience – there’s nothing wrong with slow and steady growth.
Two of the safest dividend stocks today are both heavily involved in the utilities business. So, it’s no wonder that their income streams are safe and reliable. These stocks have a yield of up to 4.55%. This is a yield that’s usually reserved for far riskier investments.
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Altagas: A safe dividend stock with a strong growth element
Altagas Ltd. (TSX: ALA) is an energy infrastructure giant with a strong position in two distinct areas. The first is the utilities business. This business is a stable one with consistent, steady growth. Utilities is the regulated and defensive part of Altagas’ business. The other business is the midstream business. This is the business with the rapid growth.
On top of Altagas’ dividend yield of 4.55%, the company has seen its stock price soar more than 33% in the last couple of years. Its strong utilities business drove growth, while its natural gas liquids and export businesses saw record volumes. As a whole, revenues have increased more than 200%. Also, normalized EBITDA has increased more than 9% over this time.
The utilities segment makes up roughly half of Altagas’ EBITDA. The midstream business accounts for the other half. This diversification is serving Altagas well and is part of what makes it one of the safest dividend stocks. The latest quarter showed the strength of the diversified business. Despite record global exports in its midstream business, Altagas was hit by weaker pricing. But this hit was offset by strong performance in its utilities business.
Thus, Altagas is still on track to meet its target numbers for 2022 despite the weakness in one of its businesses. It’s also one of the best dividend stocks in Canada.
Fortis: The blue-chip behemoth and best of Canadian dividend stocks
Fortis Inc. (TSX: FTS), on the other hand, is a large 100% utility company that’s diversified within the utilities sector. Its utilities are spread out across North America, with a roughly 50/50 split between the U.S. and Canada. Also, Fortis has a diversified list of assets, such as transmission and distribution, as well as cleaner energy fuel and renewable energy assets. This long list of geographical and asset exposure provides good diversification that breeds reliability and consistency.
Furthermore, Fortis stock has a truly enviable track record of dividend growth. In fact, this year marked its 49th consecutive year of dividend growth. This unbeatable track record of dividend growth is a key part of what makes Fortis stock one of the safest dividend stocks. The latest dividend increase was a 5.6% increase last quarter, and the company expects dividend growth in the range of +4% –6% until 2027.
Finally, Fortis has big plans for the future. Its capital investment plans include investing in its grid to prepare for the robust customer growth that Fortis expects in the next few years. It also includes spending on advanced metering and grid sensors, which reduce operating costs and improve performance.
Motley Fool: The bottom line
The two dividend stocks that I single out as among the safest on earth are some of the best Canadian dividend stocks today. They’re benefiting from their defensive essential businesses. These stable utilities are, in fact, two of the best dividend stocks in Canada. Rising inflation and interest rates certainly pose a risk to these stocks. But the strength of their businesses and relative demand inelasticity support my thesis.
