Canadian retirees can supplement their pension plans with income from blue-chip dividend stocks that typically generate steady and predictable cash flows across business cycles. You need to identify companies that have sound fundamentals and a sustainable but attractive dividend yield to benefit from a stream of passive income.
Here are three such top dividend-paying stocks in Canada you can buy in June 2023.
Toronto-Dominion Bank stock
Valued at a market cap of $150 billion, Toronto-Dominion Bank (TSX:TD) offers a dividend yield of 4.9% to shareholders. Its tier-one capital ratio of 15.3% is the second highest among banks in North America, providing it with sufficient liquidity to tide over a sluggish macro economy.
Despite its massive size, TD Bank is focused on expanding south of the border. It plans to open 150 additional branches in the U.S. by the end of 2027 to gain traction in the world’s largest economy.
In fiscal second quarter (Q2) of 2023 (ended in April), TD’s Canadian Personal and Commercial Banking business reported a net income of $1.62 billion, an increase of 4% year over year. This segment reported revenue of $4.4 billion, up 11% compared to the year-ago period due to higher margins and volume growth. This business delivered a seventh consecutive quarter of positive operating leverage.
Brookfield Infrastructure Partners stock
A diversified infrastructure company, Brookfield Infrastructure Partners (TSX:BIP.UN) has a yield of 4.4%. It has successfully acquired quality assets at a low cost over the years while exiting mature assets and recycling capital into accretive investments. This business strategy has allowed BIP to increase FFO, or funds from operations, by 10% annually in the last decade.
It now aims to increase dividends between 5% and 9% annually in the medium term, making the stock ideal for income-seeking investors.
Brookfield Infrastructure secured close to US$3 billion from five deals in 2022, the proceeds of which will be ploughed into high-growth assets. For instance, it will invest US$600 million to acquire Data4, a Europe-based data center company. It will also invest US$1 billion to privatize Triton International, a container leasing company. BIP will issue US$900 million in stock to fund this deal.
In addition to its dividend yield, BIP stock is also priced at a discount of 25% to consensus price target estimates.
Canadian Natural Resources stock
The final TSX dividend stock on my list is Canadian Natural Resources (TSX:CNQ). The energy giant pays investors a dividend yield of 5%. Despite the cyclical nature of the energy sector, CNQ has increased dividends by 20% annually in the last 20 years, showcasing the resiliency of its business.
Despite a lower pricing environment in 2023, Canadian Natural Resources reported a free cash flow of $1.4 billion in Q1. Armed with a strong balance sheet, CNQ maintains it can consistently increase production with minimal capital expenditures, thereby maximizing shareholder value.
In the first four months of 2023, the company has returned $2.8 billion to shareholders via dividends and buybacks. Once its net debt is below $10 billion, CNQ will distribute 100% of free cash flow to shareholders.
Given consensus price target estimates, CNQ stock is trading at a discount of almost 30% right now.
