The fundamentally strong dividend-paying stocks offer regular income and decent capital gains in the long term. Thankfully the TSX has several top-quality stocks offering reliable dividends. However, as payments are not guaranteed, one must carefully assess the company’s ability to pay future dividends and invest in companies with growing earnings and cash flows and well-covered payouts. Against this backdrop, let’s look at five dividend stocks that are my favourite.
Toronto-Dominion Bank
Top Canadian bank stocks are popular for their stellar dividend payment and growth history. Notably, a few of them have been paying dividends for more than 100 years, and Toronto-Dominion Bank (TSX:TD) stock is one among them. This financial services giant has been paying dividend for over 166 years. Further, it has raised its dividend at a CAGR, or compound annual growth rate, of 11% since 1995.
Its diversified revenue base, stable credit quality, strong balance sheet, and efficiency savings consistently drive its earnings higher and support its dividend payments. Further, its focus on acquisitions augurs well for growth. While Toronto-Dominion Bank has a stellar dividend payment history, its payout ratio of 40-50% is sustainable in the long term.
Enbridge
Enbridge (TSX:ENB) stock has uninterruptedly increased its dividend for 28 years. Further, it offers a high yield of over 7%. Its strong dividend growth history and attractive yield make it one of my favourite stocks for regular income. The energy infrastructure company benefits from highly diversified revenue streams and contractual arrangements to reduce risks. Also, its solid mix of conventional and renewable assets positions it well to capitalize on energy demand.
Enbridge’s low capital-intensity growth projects, power-purchase agreements, and expansion of renewable power capacity bode for future dividend growth. Further, its payout ratio of 60-70% of distributable cash flows is sustainable.
Fortis
Fortis’s (TSX:FTS) low-risk electric utility business and ability to generate predictable cash flows make it a no-brainer for investors seeking regular income. It has raised dividend for 49 consecutive years and projects a 4-6% increase in its annual dividends through 2027.
Fortis’s growing rate base (expected to increase at a CAGR of over 6% through 2027) and focus on renewables bode well for future earnings growth and payouts. One can earn a worry-free yield of about 4% by investing in Fortis stock near the current levels.
TC Energy
Next up is TC Energy (TSX:TRP). Like Enbridge, this energy infrastructure company has been growing its dividends for years. For instance, TC Energy raised its dividend for 23 years, reflecting a CAGR of 7%. Further, it projects to grow its annual dividend by 3-5% in the future years.
TC Energy’s portfolio of regulated and contracted assets, high asset utilization rate, and utility-like business model consistently generate solid cash flows to support its payouts. Moreover, through its $34 billion secured growth projects, TC Energy expects to expand its regulated and contracted assets base, which will drive its earnings base and future payouts. The company offers visibility over its future payouts. Meanwhile, it offers a compelling yield of 6.9%.
Telus
Telus (TSX:T) is the final stock on this list. The telecom company has consistently enhanced its shareholders’ returns through its multi-year dividend-growth program. It’s worth highlighting that Telus paid approximately $18 billion in dividends since 2004. Furthermore, it has increased its dividend 24 times since 2011.
Its growing subscriber base, lower churn, and cost savings enable the company to generate profitable growth and drive its payouts. Further, the expansion of 5G services and continued investments in network infrastructure indicates that Telus could continue to return solid cash to its shareholders in the coming years.
