Retirees and other investors seeking passive income are getting a chance to buy many of Canada’s top dividend stocks at discounted prices. The market correction is driving some yields to levels not seen since the 2020 market crash.
Enbridge
Enbridge (TSX: ENB) is a giant in the North American energy infrastructure industry. The company is primarily known for its extensive oil pipelines that transport nearly a third of the oil produced in Canada and the United States. The days of driving growth through big oil pipeline projects are probably over due to public and government opposition to new construction of these assets. This means Enbridge’s existing network should become more valuable. Oil demand is expected to continue to grow for years, even as the world shifts to renewable energy.
Enbridge is targeting new investments in other opportunities. The company spent US$3 billion in 2021 to acquire an oil export terminal in Texas. Last year, Enbridge secured a 30% stake in the new Woodfibre liquified natural gas (LNG) export facility being built in British Columbia. Enbridge also purchased a renewable energy development firm. France recently awarded Enbridge and its partner a contract to build a new offshore wind farm. Enbridge’s existing renewable energy assets include solar, wind, and geothermal sites in North America and Europe.
On the natural gas side, Enbridge continues to invest in its distribution utilities that provide fuel to millions of Canadian homes and businesses. Enbridge is also building gas infrastructure to connect LNG facilities in the United States.
ENB stock trades near $49 per share at the time of writing compared to more than $59 at the peak last year.
The pullback looks overdone given the solid first-quarter (Q1) 2023 earnings results that effectively matched the same period last year. Management expects adjusted earnings per share (EPS) and distributable cash flow (DCF) to grow in 2023 and beyond, supported by the $17 billion capital program.
Enbridge has increased the dividend for 28 consecutive years. At the time of writing, the stock offers a 7.2% dividend yield.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is Canada’s largest oil and natural gas producer by market capitalization. Energy producers rely on commodity prices to determine revenue. This often makes their dividend streams volatile. CNRL is an exception. The company has increased the dividend annually for 23 years with a compound annual dividend-growth rate of more than 20% over that timeframe.
CNRL took advantage of the rebound in oil and natural gas prices in 2021 and 2022 to reduce debt and buy back stock. The company also gave investors generous increases to the base dividend and even handed out a bonus payout of $1.50 per share last August. As net debt continues to fall, the company intends to send more free cash flow to shareholders.
CNQ stock trades below $74 per share at the time of writing compared to $88 in June last year. Investors who buy now can get a dividend yield of 4.9%.
The bottom line on top stocks to buy for passive income
Enbridge and CNRL pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
