With the ongoing volatility in the stock market, Canadian dividend stocks emerge as a viable option to earn a steady income. Thankfully, the TSX has several fundamentally strong dividend stocks that have been consistently paying and increasing their dividends, making them a compelling investment to ride out the volatility.
Keeping with this background, let’s look at two Canadian dividend stocks that look attractive near the current levels and offer a well-protected yield.
A top-quality utility stock
Utility stocks are relatively stable investments. Thanks to the steady demand for their offerings and rate-regulated businesses, utility companies generate reliable earnings, which allow them to consistently pay and increase their dividends for decades.
Within the utility space, I’m bullish on Fortis (TSX:FTS) stock. The large-cap company owns 10 regulated utility businesses, which account for 99% of its earnings. As almost all of its earnings come from regulated assets, its payouts are well covered, while its yield remains safe.
What stands out is that Fortis has a track record of increasing its dividend for 49 consecutive years. Impressively, the company expects to increase its dividend further by an average annualized growth rate of 4-6%.
Through its $22.3 billion capital plan, Fortis expects its rate base to increase at a CAGR (compound annual growth rate) of over 6% through 2027. This will allow the company to enhance its shareholders’ returns through higher dividend payouts.
Overall, Fortis’s defensive business, growing rate base, and visibility over future dividend payments make it a must-have stock to earn steady income amid all market conditions. Moreover, investors can earn a decent dividend yield of 3.81% (based on its closing price of $59.18 on April 5) by investing in FTS stock near the current levels.
A resilient energy stock
While energy stocks are vulnerable to economic conditions, Enbridge (TSX:ENB) has outshined its peers with its stellar dividend payment history. Enbridge has been paying a regular dividend for 68 years. Furthermore, it increased its dividend at a CAGR of 10% (higher than its peers) in the last 28 years.
It transports crude oil and natural gas and benefits from contractual arrangements that reduce commodity price and volume risks. Moreover, its highly diversified income stream and investments in renewable power generation position it well to deliver solid distributable cash flows that cover its payouts.
Its assets witness higher utilization and generate reliable cash flows. Meanwhile, most of its earnings before interest, taxes, depreciation, and amortization has protection against inflation.
The company’s low-risk commercial business model will likely deliver predictable cash flows. Moreover, its investments in conventional and renewable energy, the momentum in the liquids and liquefied natural gas exports, and strategic acquisitions position it well to deliver robust cash flows, allowing it to grow its dividend.
Investors can earn a high yield of 6.72% by investing in Enbridge stock at the current levels.
Bottom line
Fortis and Enbridge are popular for enhancing their shareholders’ value through high dividend payments. Further, they have reliable cash flows and well-covered payouts. While both these Canadian companies offer solid cash, investors should note that dividends are not guaranteed. Thus, investors should diversify their portfolios and not depend on one or two stocks.
