The Consumer Price Index in the United States rose 5% in March from its previous year, which was lower than analysts’ estimate of 5.1%. It was the lowest increase since June 2021. Although there are signs of inflation cooling down, it still remains higher than the Federal Reserve’s target of 2%.
Concerningly, the minutes of the latest Federal Reserve Policy meeting released last week indicated that the United States economy could fall into a mild recession later this year amid the fallout of the recent banking crisis. So, given the uncertain outlook, it is prudent to invest in quality dividend stocks to earn a safe passive income, irrespective of the market movement. Here are my three top picks, all which generate stable cash flows and pay dividends at healthier rates.
Fortis
Fortis (TSX:FTS) is one of the safest dividend stocks to buy right now, given its low-risk regulated utility business, impressive track record of dividend growth, and healthy growth prospects. Supported by its operational excellence, the company has managed to keep the increase in its operating expenses below inflation for the previous five years. Also, it has delivered an average total shareholders’ return of 11.3% for the last 20 years.
Meanwhile, Fortis has committed to invest around $22.3 billion from 2023 to 2027, growing its rate base at a CAGR (compounded annual growth rate) of 6.2%. These investments include $5.9 billion in clean energy. The company expects to meet only 33% of these capital requirements from external debt, while the rest is from the cash generated from its operations and DRIP (dividend reinvestment plan). So, higher interest rates will have a lesser impact on its financials.
Additionally, Fortis has been raising its dividends for the previous 49 years (50 years makes a Dividend King). Given its healthy growth prospects, the utility hopes to increase its dividends by 4%–6% through 2027. So, with a dividend yield of 3.81% and an NTM (next 12 months) price-to-earnings multiple of 20.1, Fortis would be an ideal buy.
Enbridge
Enbridge (TSX:ENB), which has raised dividends uninterruptedly for the last 68 years, would be another safe dividend stock to have in your portfolio. The midstream energy company earns around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from cost-of-service or take-or-pay contracts. Also, approximately 80% of its adjusted EBITDA is inflation-indexed, thus generating stable and predictable cash flows. Supported by these solid cash flows, the company has raised dividends at a CAGR of over 10% for the last 28 years.
With the growing oil and natural gas exports from North America to Europe, Enbridge could continue to enjoy a higher asset utilization rate. Besides, after putting $4 billion of projects into service in 2022, the company expects to complete another $3 billion this year and $11 billion in the coming years. Amid these growth prospects, I believe Enbridge is well-positioned to continue its dividend growth. Meanwhile, its forward dividend yield stands at a juicy 6.63%, making it an attractive buy.
BCE
My final pick would be one of the dominant players in the Canadian telecom industry, BCE (TSX:BCE). Supported by its recurring revenue streams, the company enjoys healthy cash flows, which have allowed it to raise dividends by over 5% annually for the previous 15 years.
Over the last three years, the telco has invested around $14 billion, expanding its 5G and broadband infrastructure. The company’s 5G infrastructure covered 82% of the country’s population by the end of last year while completing 80% of its planned broadband buildout. Meanwhile, BCE has committed to invest around $4.8 billion this year. With these investments, the company expects its 5G network to reach 85% of Canadians while completing 85% of its planned broadband buildout.
These growth initiatives could boost its cash flows, thus allowing BCE to continue paying dividends at a healthier rate. Currently, its dividend yield stands at 6.09%, making it one of the attractive buys.
