The 2 Canadian Dividend Stocks You’ll Want to Own in Tough Times

These high-yield dividend stocks will add to your income amid tough times.

| More on:
A red umbrella stands higher than a crowd of black umbrellas.

Source: Getty Images

High-yield dividend stocks are essential to your portfolio, as they add to your income during tough times. Moreover, one can reinvest the dividend to generate solid capital gains in the long term. However, dividends are not guaranteed, and corporations may cut their payouts amid challenges. Thus, investors shouldn’t invest in stocks solely based on their higher yields.

Nonetheless, the TSX has several top stocks with a solid track record of dividend payment and growth. Their resilient businesses, steady cash flows, and growing earnings base suggest that one can rely upon these stocks in all market conditions to earn worry-free income. Moreover, they offer attractive yields that make them solid income stocks. 

I’ll discuss two Canadian stocks that offer high yields and have been paying dividends for decades. Furthermore, these large-cap corporations own resilient businesses, have growing earnings bases, and their payouts are well covered, which makes them must-have stocks in tough times. 

Enbridge

Enbridge (TSX:ENB) is an energy infrastructure company transporting crude oil, natural gas, and NGL (natural gas liquid). Moreover, it is steadily increasing its exposure to renewable energy. 

As Enbridge plays a crucial role in the energy value chain, its assets benefit from the high utilization rate and long-term contractual arrangements. Also, it has highly diversified revenue streams. 

Thanks to its high-quality asset base and diversified revenue streams, Enbridge generates solid DCF (distributable cash flow), which drives its dividend payments. 

It’s worth highlighting that Enbridge has been paying a dividend for 68 years. Impressively, it increased its dividend for 28 consecutive years at a CAGR (compound annual growth rate) of 10%. 

Its investments in conventional and renewable assets position it well to capitalize on energy demand and deliver robust cash flows. In addition, its multi-billion-dollar secured capital projects, revenue escalators, and inflation-protected EBITDA (earnings before interest, taxes, depreciation, and amortization) imply that Enbridge will likely generate strong DCF/share, which will enable the company to enhance its shareholders’ returns through higher dividend payments. 

While Enbridge is poised to deliver strong shareholders’ returns, its target payout ratio of 60-70% of DCF is sustainable. This energy stock pays a quarterly dividend of $0.887 a share, translating into a high yield of 6.78%.

Scotiabank

My final pick is from the Canadian banking space. It is worth highlighting that the top Canadian bank stocks have a stellar history of paying dividends for decades. Within the banking sector, investors could consider investing in the shares of Scotiabank (TSX:BNS) for its high dividend yield. 

Scotiabank started paying a dividend in 1833 and has consistently paid regular dividend since then. Furthermore, the financial services giant’s dividend has grown at a CAGR of 6% over the past decade. Scotiabank’s solid dividend payments are supported by its growing earnings base. Notably, its adjusted earnings increased at a CAGR of 5% in the past decade, which drove higher payouts. 

Looking ahead, Scotiabank’s exposure to the high-growth banking markets, diversified revenue base, and ability to grow loans augur well for growth. Moreover, its solid credit quality and robust balance sheet will likely cushion its earnings and dividend payments. 

Scotiabank offers a lucrative yield of 6.26%, making it a must-have income stock near the current levels. Moreover, its low payout ratio is sustainable in the long term. 

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 Bank Of Nova Scotia and Enbridge. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Target. Stand out from the crowd
Dividend Stocks

RRSP Pension: 2 Dividend Stocks to Buy on the Latest Dip

These high-yield TSX stocks look cheap right now for RRSP investors.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

Safe and Sound Stocks for Canadians: My Top 5 Choices

Five safe stocks to buy on a market pullback.

Read more »

5G chip
Dividend Stocks

8.86% Dividend Yield! I’m Buying This TSX Stock and Holding it for Decades

The TSX is a gold mine of lucrative dividend stocks trading near their multi-year low. An 8.86% dividend yield is…

Read more »

green power renewable energy
Dividend Stocks

Brookfield Infrastructure vs. Brookfield Renewable: Which Brookfield Stock is a Better Buy?

Both Brookfield Infrastructure (TSX:BIPC) and Brookfield Renewable (TSX:BEPC) are dividend income earners trading at a discount, but which stock is…

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

Cash Kings: 3 TSX Stocks That Pay Monthly

These Canadian stocks reward their shareholders with regular monthly dividends and a high yield.

Read more »

Happy retirement
Retirement

3 Stocks Retirees Should Absolutely Love

Retirees aiming for a solid mix of capital gains and dividend returns should consider these three stocks.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

Passive Income: Top TSX Dividend Stocks to Buy for 7% and 8% Yields

These top TSX dividend stocks look undervalued and now offer high yields for investors seeking passive income.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

TFSA 101: Earn $500 Per Month Tax-Free

Here's how a covered-call ETF plus a TFSA can help you create a lucrative monthly passive-income stream.

Read more »