2 Top Dividend Stocks You Can Buy and Hold Forever

Earn worry-free dividend income for years with fundamentally strong dividend stocks like Fortis.

| More on:

Dividend stocks enable you to earn regular cash. In addition, dividend-paying companies mostly have stable businesses and a growing earnings base, which supports higher payouts. Thanks to their solid earnings generation capabilities, these stocks add stability to your portfolio and deliver decent capital gains over time. 

While the TSX has several fundamentally strong companies that have been paying and growing their payouts for years, I’ll restrict myself to Enbridge (TSX:ENB) and Fortis (TSX:FTS). Both companies are Dividend Aristocrats and have paid and raised their dividends in all market conditions for decades. Let’s look at factors that make Enbridge and Fortis top dividend stocks to buy and hold forever. 

Enbridge – a dependable income stock

With a dividend growth history of over 28 years (reflecting an average annualized dividend growth rate of 10%), Enbridge is a no-brainer stock to earn stable income regardless of market conditions. It transports oil and gas and owns high-quality conventional and renewable energy assets. Also, as North America’s largest gas utility, it operates a regulated natural gas utility business.

Overall, the energy delivery comoany’s diversified portfolio, high utilization of its assets, and long-term contracts drive its DCF (distributable cash flow) and higher payouts. In addition, the regulated cost-of-service tolling frameworks, low-risk commercial arrangements, and power-purchase agreements bode well for growth. 

The company’s stellar track record of dividend payments shows the resiliency of its DCF and its ability to grow its dividend. Moreover, it is poised to deliver higher cash flows and enhance its shareholders’ value through increased dividend payments in the coming years. 

Besides the strength in its base business, investments in conventional and low-carbon energy assets position it well to capitalize on the future energy demand. Also, its ability to generate solid cash to self-fund its future growth opportunities is encouraging. The company will also gain from the commission of new projects, investments in low capital intensity and regulated utility projects, and accretive acquisitions. 

Enbridge stock currently pays a quarterly dividend of $0.887 per share. This reflects an attractive dividend yield of about 7.2% (based on its closing price of $48.97 on August 9). 

Fortis – a must-have income stock

With 49 years of consecutive dividend increases, Fortis is a must-have dividend stock to buy and hold forever. It operates a low-risk regulated electric utility business. Thanks to its regulated asset base, the company generates predictable and growing cash flows that drive its dividend payments. Further, about 99% of its earnings come from utility businesses, implying that its payouts are very well covered. 

Looking ahead, the company’s $22.3 billion capital projects will help expand its rate base and drive its future earnings and dividend payments. Moreover, energy transition opportunities augur well for growth. 

Fortis expects its rate base to expand to $46.1 billion by 2027 from $34.1 billion in 2022. This reflects an annualized growth rate of about 6.2%. Thanks to the expected increase in its rate base, the company plans to increase its dividend by 4-6% annually through 2027. 

Investing in Fortis stock can help you earn a worry-free dividend yield of 4.1%. Moreover, visibility over its future payouts supports my bull case.  

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use Your TFSA to Double Your TFSA Contribution

If you're looking to double up that TFSA contribution, there is one dividend stock I would certainly look to in…

Read more »

woman looks at iPhone
Dividend Stocks

Retirees: Is TELUS Stock a Risky Buy?

TELUS stock has long been a strong dividend provider, but what should investors consider now after recent earnings?

Read more »

Concept of multiple streams of income
Dividend Stocks

Is goeasy Stock Still Worth Buying for Growth Potential?

goeasy offers a powerful combination of growth and dividend-based return potential, but it might be less promising for growth alone.

Read more »

A person looks at data on a screen
Dividend Stocks

How to Use Your TFSA to Earn $300 in Monthly Tax-Free Passive Income

If you want monthly passive income, look for a dividend stock that's going to have one solid long-term outlook like…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Passive Income Seekers: Invest $10,000 for $38 in Monthly Income

Want to get more monthly passive income? REITs are providing great value and attractive monthly distributions today.

Read more »

Forklift in a warehouse
Dividend Stocks

Invest $9,000 in This Dividend Stock for $41.88 in Monthly Passive Income

This dividend stock has it all – a strong yield, a stable outlook, and the perfect way to create a…

Read more »

An investor uses a tablet
Dividend Stocks

3 No-Brainer TSX Stocks to Buy With $300

These TSX stocks provide everything investors need: long-term stability and passive income to boot.

Read more »

analyze data
Dividend Stocks

End-of-Year Retirement Planning: 3 Buy-and-Hold Stocks for Canadian Investors

Choosing the right stocks for the retirement portfolio differs from investor to investor. However, there are some top stocks that…

Read more »