Discover the Income-Generating Potential of Canada’s Top Dividend Stocks

Here’s why Fortis (TSX:FTS) and Enbridge (TSX:ENB) are two of the top Canadian dividend stocks long-term investors should consider.

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

When it comes to planning for retirement, having a portfolio of high-quality dividend stocks can be a great choice. They act as a reliable source of income, enabling investors to fulfill their post-retirement goals. 

However, choosing just any company that provides dividends will not work. The organization needs to have a solid track record of dividend payments along with sustainable long-term growth plans.  

In this regard, here are two such stocks which investors can consider buying. 

Fortis

Fortis (TSX:FTS) is a Canadian multinational gas and electric utility organization. The company’s quarterly dividend of $0.565 per common share amounts to a yield of roughly 3.9%. While certainly worth considering (in combination with its payout ratio), Fortis’s long-term dividend-growth trajectory is what most investors stick around for. This is a company that’s managed to raise its dividend each and every year for five decades straight. That’s impressive in its own right and is certainly a reason Fortis should be highlighted on most dividend lists when it comes to Canadian stocks.

Fortis reported excellent first-quarter (Q1) results earlier in May. The company’s net quarterly earnings amounted to US$437 million in comparison to last year’s same quarter’s US$350 million. On a per-common-share basis, earnings surged to US$0.90 from Q1 2022’s US$0.74. The company also made capital expenditures worth US$1 billion, staying on track with its US$4.3 billion annual capital investment plan.  

Furthermore, almost 56% of Fortis shares are owned by institutional investors. Now, such entities usually select stocks after a lot of market analysis and scrutiny. This indicates their optimistic attitude about the company’s long-term performance, making it another reason for investors to buy this stock. 

Enbridge

Enbridge (TSX:ENB) is one of the biggest energy infrastructure companies in Canada. Recent data states that this organization had declared a dividend payment of $0.89 per share for Q1 2023. This indicates a payout ratio of 123.90% (noticeably high), which results in a dividend yield of around 7.3%. It is substantially higher than the 3.752% sectorial average, indicating the stock’s market-beating potential for those looking for up-front yield.  

Of course, any stock with a yield this high and a payout ratio that’s this far above 100% ought to be concerned. In some respects, Enbridge may look like a dividend stock that’s waiting to get cut. Time will tell, but Enbridge has been able to maintain its high payout for quite some time.

This is partly due to the company’s ability to continue to pump out strong free cash flow and earnings numbers. Earlier in May, the company produced yet another strong quarter, seeing operating income surge to $3.9 billion from $2.9 billion a year prior. Similarly, earnings before interest, taxes, depreciation, and amortization grew to $4.5 billion, significantly higher than the $4.1 billion reported in the same quarter a year prior.

If these sorts of quarterly numbers can be replicated moving forward, Enbridge could be among the high-yield stocks investors kick themselves for not owning at today’s levels.

Bottom line

The strong financials and long-term growth potential of both companies make them capable of providing dividend payments at a sustainable pace. Thus, investors planning their retirement portfolios can consider purchasing them.

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 Enbridge. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

stock research, analyze data
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

TSX dividend stocks such as Enbridge, TD Bank, and Telus, can help you earn $500 in monthly dividend payments.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

person on phone leaning against outside wall with scenic view at airbnb rental property
Dividend Stocks

2 TSX Stocks Poised to Have a Big Summer

Restaurant Brands International (TSX:QSR) stock and another darling that could be too cheap to ignore this summer.

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Forget Fortis Stock: Buy This Magnificent Utilities Stock Instead

Looking for high dividends and returns? Then I'm sorry, but Fortis (TSX:FTS) stock probably isn't for you.

Read more »

Increasing yield
Dividend Stocks

2 High-Yield (But Slightly Risky) Stocks to Keep Your Eye on

Have these top TSX dividend stocks finally bottomed?

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks I’d Buy if They Fall a Bit

Any near-term decline in these two top Canadian dividend stocks will make them look even more attractive.

Read more »