Dividend Stocks for Canadians: A Smart Way to Invest for Retirement

Here are three of the top Canadian dividend stocks long-term investors ought to consider when building a balanced and diversified portfolio.

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Dividend stocks occupy an important position in the portfolios of almost all investors. They are an excellent source of passive income and one of the best assets for a worry-free retirement. 

However, when it comes to choosing the right dividend stocks, things can get a bit tricky. The companies investors choose must have strong financials and long-term growth prospects to facilitate sustainable dividend payments. 

In this regard, they can consider investing in Canada’s top dividend stocks. Here are two of the best options I think are worth buying for retirement right now on dips moving forward.

Fortis

Fortis (TSX:FTS) is a Canadian multinational diversified energy utility company. Fortis announced a dividend of $0.56/share for the previous quarter. The payment was initiated on June 1, 2023, indicating a payout ratio of 76.53% and a dividend yield of 3.9%.

Most investors pick Fortis among the plethora of Canadian utility stocks, but not for its yield. This yield of less than 4% leaves much to be desired for hard-core, income-oriented investors.

Rather, it’s the company’s track record of hiking its dividend distribution annually. For five decades straight, Fortis hasn’t missed the opportunity to increase its return to shareholders.

Given the company’s solid performance in the first quarter (Q1), investors have reason to believe this streak can continue for decades to come. The company reported near earnings of $437 million, a significant jump from $350 million during the same quarter last year. This corresponded to earnings per share of $0.91, blowing last year’s $0.78 in earnings per share (EPS) away, and making the company’s $0.56 quarterly distribution seem very manageable.

In recent news, Fortis has announced the sale of its British Columbia-based Aitken Creek Natural Gas Storage Facilities. This move will strengthen the company’s balance sheet and support its regulated growth strategy. I like that over the long term, and Fortis remains one of my top picks for this reason.

Restaurant Brands

Restaurant Brands (TSX:QSR) is a Canadian international quick-service restaurant holding company. The company’s latest earnings report shows a quarterly distribution of $0.75 for Q1 2023, amounting to an annualized yield of 2.9%.

Like Fortis, Restaurant Brands has a solid track record of raising its dividend (though by no means to the same degree in terms of time span). Additionally, the company’s payout ratio of around 66% indicates there’s plenty of room for dividends to rise over time.

Those seeking sustainable dividend income go to Restaurant Brands for its highly stable business model. Fast food isn’t going anywhere, despite health concerns. And in a recession, consumers eat more (not less) cheap and accessible meals from one of Restaurant Brands’s banners.

Given the company’s strong earnings growth profile, this is a stock I think is worth buying on any dips moving forward. Its valuation of roughly 23 times earnings looks cheap, based on a forward-looking EPS growth rate of 14.3% expected.

Dream Industrial REIT

Dream Industrial REIT (TSX:DIR.UN) is a diversified real estate investment trust. Its portfolio comprises industrial properties across Canada, the United States, and Europe, totalling around 70.4 million square feet. 

This company continues to be a favourite among dividend investors, as it makes monthly payouts to its unitholders. For June 2023, its payout was $0.06 per unit, payable on July 14. Unitholders as of June 29 are eligible for this payment. 

This industrial real estate investment trust has performed very well, despite concerns around the real estate and banking sectors this year. Investors need only look at the trust’s chart to see where investors are diversifying into when it comes to their real estate holdings. This is a stock with strong structural tailwinds I think is worth nabbing for a retirement portfolio right now.

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.

Fool contributor Chris MacDonald has positions in Restaurant Brands International. The Motley Fool recommends Dream Industrial Real Estate Investment Trust, Fortis, and Restaurant Brands International. The Motley Fool has a disclosure policy.

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