Given how wild last week was in the markets, Canadian investors may be looking for some safety in quality TSX dividend stocks. While no stock investment is ever risk free, Canada does have plenty of stocks that are certainly lower risk. You may have to sacrifice dividend yield for safety. But if it’s peace of mind and consistency you want, these three TSX dividend stocks should do the trick.
A super-safe TSX utility stock
No discussion about safe TSX stocks would be complete without Fortis (TSX:FTS) near the top of the list. Fortis has paid and consecutively grown its dividend for 49 years. In 2023, it will hit 50 years if it can achieve its target of 4-6% annual dividend growth.
Fortis operates 10 regulated utility businesses across North America. It largely provides energy transmission and distribution services. Ultimately, it’s Fortis’s job to provide safe and reliable services to its customers. It takes the same approach with shareholders.
While Fortis has a lot of debt to fund its capital-intensive business, the debt is locked in and very long dated. The company plans to keep growing by around 6% a year by investing in many smaller achievable/profitable projects. Right now, this TSX stock yields a 4.2% dividend.
Its dividend-payout ratio sits at around 80%, which means 80% of its profits are distributed in dividends. Management has noted that it is focused on bringing this down over time. Given how consistent and predictable its overall business is, its current dividend continues to look very safe.
A solid real estate stock
Granite Real Estate Investment Trust (TSX:GRT.UN) is another sleep-well-at-night TSX dividend stock. Granite is Canada’s largest industrial real estate investment trust (REIT). It owns large manufacturing and logistics properties in Canada, the U.S., and Europe.
Its properties are leased to many investment-grade companies. Likewise, its weighted average lease term is 6.7 years. Today, it has 99.6% occupancy. This means it has clear sightlines to the income that it will earn. Even during the March 2020 market crash, it had zero rent deferrals and no bad debts.
Granite is very conservatively financed. Its leverage ratio is only 32%, and it has over $1 billion of spare liquidity. This REIT pays a 3.9% dividend yield. Its payout ratio is 75%.
This TSX stock has grown its dividend consecutively for 12 consecutive years. It’s a very safe way to get exposure to real estate and a strong industrial property market.
A very stable TSX energy stock
Another safe stock for a slightly bigger yield is Canadian Natural Resources (TSX:CNQ). Now, you don’t typically associate safety with energy stocks. However, when it comes to dividends, Canadian Natural has a premium history. It has increased its dividend by a +20% compound annual growth rate for the past 23 years.
Last year, it increased its dividend twice and it paid a special $1.50 per share dividend. Even though oil prices have pulled back to the US$75-85 range, CNQ can be cash flow positive (and support its dividend) at about US$40. The company is a machine at producing energy. It is extremely efficient and very well managed.
In 2022, the company drastically reduced debt, so it is sitting in a solid financial position. Today, its stock yields a 4.5% dividend. Its payout ratio sits at 37% of 2022 earnings, so it has ample financial flexibility to maintain its dividend (even if energy prices fluctuate).