2 Canadian Dividend Stocks to Buy for Consistent Passive Income

These top dividend stocks have raised their distributions annually for more than two decades.

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Turbulence in the Canadian market is expected to continue in the coming months and stock prices could certainly move lower.

That being said, the latest segment of the market correction is now giving investors a chance to buy some great Canadian dividend stocks at cheap prices. Investors with cash to put to work in a portfolio focused on passive income should consider top TSX dividend stocks with good track records of dividend growth.

Telus

Telus (TSX:T) reported a 15.7% jump in operating revenue in the first quarter (Q1) of 2023 compared to the same period last year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 10.7% and free cash flow increased by 28.9% to $535 million. Adjusted net income, however, slipped 7% to $386 million in the quarter due to a 22.8% jump in operating expenses. Higher financing costs resulting from the steep rise in interest rates contributed to the increase in expenses.

Despite challenging macroeconomic conditions, Telus expects consolidated operating revenue to increase by at least 11% this year. Adjusted EBITDA guidance is for growth of at least 9.5%. Lower capital outlays compared to 2022 will help drive free cash flow to about $2 billion in 2023.

This means investors should see decent dividend growth continue into 2024. Telus has increased the payout annually for more than two decades and normally boosts the distribution by 7-10% every year.

Despite the positive guidance and the stickiness of the core wireless and wireline revenue streams the stock is down 18% over the past 12 months.

The pullback appears overdone, and investors can now pick up a 5.6% dividend yield.

Enbridge

Enbridge (TSX:ENB) is another top TSX dividend stock that now looks oversold. The share price is below $48 at the time of writing compared to the 12-month high around $59.50.

As with Telus, the sharp decline seems out of whack with the performance of the business and the outlook for revenue and cash flow growth. Enbridge reported Q1 2023 results that were essentially in line with last year. The company expects earnings per share to grow by 4% per year through 2025 and by 5% afterwards. Distributable cash flow should increase by 3% in 2023-2025 and by 5% beyond that timeframe. Growth is partly expected to come from the $17 billion capital program and could increase if Enbridge makes new accretive acquisitions.

Oil and natural gas demand are expected to increase in the coming years. Enbridge moves 30% of the oil produced in Canada and the United States and is growing its export capabilities for both fuels. The company’s natural gas utilities provide reliable cash flow, and the renewable energy assets are growing to help complement the revenue stream from core oil and gas pipeline infrastructure.

Enbridge increased the dividend in each of the past 28 years. Investors who buy Enbridge stock at the current level can pick up a 7.4% dividend yield.

The bottom line on top stocks for passive income

Telus and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income, these stocks deserve to be on your radar.

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 and TELUS. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge and Telus.

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