Historically, dividend stocks have outperformed the broader equity markets thanks to their regular payouts and capital appreciation. These companies are less susceptible to market volatility due to their solid underlying businesses and stable cash flows. So, I believe dividend stocks would help you build wealth over the years. Meanwhile, here are my three top picks, with dividend yields of over 6%.
Enbridge (TSX:ENB) would be one of the top dividend stocks to have in your portfolio, given its regulated underlying business, impressive track record, and high yield.
The company operates a pipeline network transporting oil and natural gas across North America. With around 98% of its cash flows underpinned by cost-of-service or long-term contracts, the company generated stable and predictable cash flows, allowing it to pay a dividend uninterrupted for 68 years. In December, the company raised its quarterly dividend by 3.2% to $0.8875/share, marking the 28th consecutive annual hike. Its yield for the next 12 months stands at 6.8%.
Meanwhile, the demand for natural gas could grow at a CAGR (compound annual growth rate) of 10% through 2040. Natural gas exports from North America are growing, benefiting the company. Also, the company is progressing with its $18 billion growth and expansion projects, which could drive its financials in the coming years. So, I expect the company’s future payout to be safe.
Second on my list is BCE (TSX:BCE), which has been raising its dividend by over 5% for the last 15 years. With a quarterly dividend of $0.9675/share, the company’s forward yield as of the February 17th closing price stands at 6.3%. Although rising interest rates impact its near-term profitability, I am bullish on the company due to its stable cash flows from recurring revenue sources and high growth prospects.
Amid digitization and growth in remote working, learning, and shopping, the demand for telecommunication services is rising. Supported by its capital investment, the company added 854,000 new fibre connections last year. It hopes to add 650,000 more connections this year. Expanding 5G and 5G+ services across the country could boost its financials in the coming years. Despite the growth initiatives, BCE trades at an attractive next-12-month (NTM) price-to-earnings multiple of 19.2.
NorthWest Healthcare Properties REIT
With a dividend yield of 8.2%, NorthWest Healthcare Properties REIT (TSX:NWH.UN) is my third pick. Although the company has been under pressure for the last few months due to rising interest rates, I am bullish due to its diversified and highly defensive healthcare portfolio.
The company has signed long-term agreements with government-backed tenants, thus achieving higher occupancy and collection rate irrespective of the economic outlook. Also, around 82% of its rent is inflation indexed, thus shielding its financials from price rises. Further, the company’s expansion across high-growth markets, such as the United Kingdom, Canada, and the United States, could boost its financials in the coming years.
Despite its high yield and stable cash flows, the company trades at an attractive price-to-book multiple of 0.9, making it an attractive buy for income-seeking investors.