Dividend stocks are a great source to earn income in retirement. However, the volatility associated with the stocks could keep retirees from investing (due to their low-risk profile). While stocks are volatile, retirees could rely on the shares of fundamentally strong, dividend-paying companies with resilient business models and a growing earnings base. Also, one must focus on diversification to reduce risks further.
Against this backdrop, I’ll discuss three Canadian stocks with solid dividend payment histories, a growing earnings base, and well-covered payouts. Let’s begin.
Fortis
Fortis (TSX:FTS) is an obvious choice for retirees to earn a steady income. The company owns a low-risk utility business that generates predictable and growing cash flows. Its business is backed by regulated assets that account for most of its earnings, implying that its payouts are well protected in all market conditions while its stock remains less volatile.
Thanks to its predictable cash flows, Fortis has consistently increased its dividend for 49 years. Furthermore, the company is confident of growing its future dividend at an average annualized growth rate of 4-6% through 2027.
The company’s $22.3 billion capital plan will likely drive its rate base higher in the coming years, which will support earnings and payouts. Moreover, energy transition opportunities will drive its financials. Retirees can earn a low-risk yield of 3.9% by investing in Fortis stock near the current levels.
Telus
Telus (TSX:T) could be another lucrative option for retirees to earn a steady income. Telus’s services are deemed essential for the economy. Further, the company has a track record of consistently delivering profitable growth, which supports its payouts. It’s worth highlighting that Telus has returned substantial cash to its shareholders in the form of dividends and share buybacks.
Notably, Telus has paid over $18 billion in dividends since 2004. Impressively, the company raised its dividend 24 times since May 2011.
Telus’s growing customer base, lower churn, and expansion of 5G services bode well for future growth. The company expects to increase its dividend by 7-10% per annum through 2025. Further, it offers a lucrative yield of 5.7%. Overall, its solid business, profitable growth, and focus on enhancing shareholders’ returns make it an attractive income stock. Also, its target payout ratio of 60-75% of its free cash flows is well covered and sustainable in the long term.
Enbridge
The final stock on this list is Enbridge (TSX:ENB). The company that transports oil and gas has uninterruptedly increased its dividend for 28 years. Furthermore, it has been paying a dividend for 68 years. Notably, Enbridge paid and raised its dividend even during the pandemic, which shows the resiliency of its payouts.
The company’s highly diversified income streams and continued investments in conventional and renewable energy assets position it well to capitalize on the long-term energy demand and deliver steady growth. In addition, its long-term contracts with provisions to reduce price and volume risks are positive.
Enbridge’s multi-billion-dollar secured capital projects, regulated utility-like projects, and power-purchase agreements will support future growth and drive its payouts. Enbridge stock offers a high yield of approximately 7%, while its payout ratio of 60-70% is sustainable.
