If you want super safe dividends, you need to look for super-safe TSX stocks. That means looking for companies that earn contracted, regulator, or recurring income.
Likewise, it means looking for stocks in businesses with strong balance sheets, defensive competitive moats, a record of smart value creation, and a long-term opportunity to keep growing.
Always look for dividend reliability over high dividends
Super-safe dividend stocks are not always the ones with the highest dividend yield. In fact, a very high dividend yield can be a major warning sign to investors, especially if you plan on relying on that income for retirement.
It is better to find a stock that pays a sustainable, steadily growing dividend versus one that pays a high dividend but cannot sustain it if times get tough. Here are three top TSX stocks that should be super-safe, even if we dive into a recession this year.
A super-safe TSX utility stock
Fortis (TSX:FTS) is a renowned Canadian stock for its stability and longevity. There are only a handful of TSX stocks with decades of consecutive dividend growth. Fortis has 49 years of consecutive dividends. Chances are pretty high that it hits 50 years in 2023.
Fortis is extremely defensive. It provides essential services (electricity and gas transmission that have perpetual demand), it operates a services monopoly in its jurisdictions, and its revenues are regulated and predictable.
Fortis stock earns a 3.8% dividend yield. Fortis dividend-payout ratio is 78%. This suggests it can still afford its dividend and finance some growth opportunities. Last year, management noted that it intends to see the payout ratio drop, as it moderates its dividend-growth rate to 4-6% annually.
Fortis is not a cheap utility stock at 20 times earnings. However, if you want long-term income that is protected by an extremely defensive business, this is a good TSX stock to hold.
A long-term TSX stock with massive dividend growth
Another TSX stock that has very safe income is Canadian National Railway (TSX:CNR). This business has been in operation for over 100 years. That durability is a great testament to its business quality.
Canadian railroads are extremely defensive because they have limited competition and their services are impossible to replicate. Canada is a commodity-heavy country, so it needs its railroads to keep the economy running.
Canadian National has grown its dividend substantially ever since it was publicly listed in the late 1990s. Since 2013, its dividend has risen by over 12% on average annually. This TSX stock only yields around 2%, but its payout ratio sits very safely at around 40%.
A real estate infrastructure stock
Granite REIT (TSX:GRT.UN) is another very defensive TSX stock for income. While Granite is a real estate stock, I like to think of it more as an infrastructure business. It provides the brick-and-mortar properties that enable logistics, storage, transportation, and general commerce across North America and Europe.
As Canada’s largest industrial REIT, it has the scale and expertise to grow by acquisition, development, and organic rental rate uplifts. The company is very prudently managed. It has been very cautious not to take on too much debt to execute its strategy. Despite that, it has still been growing cash flows per unit by the high single digits in the past few years.
Granite has grown its annual distribution for 12 consecutive years. Today, this TSX stock yield close to 4%. Its payout sits at 71%, which is high, but still provides flexibility for it to invest excess cash into a substantial development pipeline.
