3 Top Canadian Dividend Stocks Yielding Over 5% in May 2023

Looking for recession-resilient Canadian stocks? Here are your top three picks.

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Markets still seem in growth mode even when recession possibilities are rising. However, dividend names will likely gain the limelight with more uncertainties around. Here are three TSX Canadian dividend stocks that offer handsome yield and stability.

Enbridge

Canadian energy midstream giant Enbridge (TSX:ENB) currently yields a juicy 6.7%. It has a long payout history and has increased dividends for the last 28 consecutive years. Its earnings stability stands tall in uncertain markets and plays well for investor returns.

Enbridge’s per-share earnings have grown by 6% compounded annually in the last decade. Even when oil and gas prices were weak, it managed to grow steadily because of its stable business model. It earns revenues mainly from its long-term, fixed-fee contracts, facilitating earnings visibility.

The company’s balance sheet strength and earnings stability will likely drive consistent dividend growth in the long term. It aims to maintain a 60-70% annual payout ratio, which is in line with the industry average.

If you are looking for capital appreciation, ENB might not be an apt choice because of its low correlation with oil prices. However, if stable passive income is what’s on your mind, its superior yield and stability will likely delight you.

Canadian Utilities

A top utility stock Canadian Utilities (TSX:CU) offers even greater stability with a dividend yield of 5%. It is one of the classic defensive bets to protect your portfolio in volatile markets.

It generates almost all of its earnings from regulated operations, which brings visibility and predictability. Earnings of utility companies do not move based on economic cycles, and that’s why they are considered non-cyclical.

The demand for their services remains constant in recessions and even in economic booms. This makes their cash flows and dividends much more stable. As a result, Canadian Utilities has increased its shareholder payouts for the last 50 consecutive years.

Moreover, interest rates and utility stocks trade inversely to each other. As the rate hikes are expected to pause, it will be a big positive for them. If they start moving lower, probably later this year or early in 2024, investors can see a decent upward move in utilities.

BCE

The telecom sector has fairly similar stability as the utilities. Canadian telecom giant BCE (TSX:BCE) is one compelling bet for dividend seekers. It yields a decent 6%, way higher than TSX stocks.

BCE is the biggest by market cap among the three-payer-dominated Canadian telecom industry. Its earnings have grown by 2% compounded annually in the last decade. That’s an insignificant growth compared to broader markets. But when stability is more important, growth has to take a backseat.

BCE has accelerated its capital expenditures in the last few years, mainly to improve its network infrastructure. A large portion of this capex went for network improvement, which will likely play well for subscriber base growth.

It will likely keep growing steadily with its large subscriber base and capital investments. BCE has some of the strongest balance sheets in the sector, with a solid liquidity position and manageable leverage. Investors can expect regularly growing dividends along with decent capital returns 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.

The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned

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