2 of the Best Dividend Stocks in Canada

Here are two of the best dividend stocks in Canada for long-term investors seeking stability and total returns in this current environment.

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Dividend stocks are worth considering for investors with income needs in retirement. That’s well known. However, what’s perhaps less evident for many long-term investors is the fact that dividend income often provides roughly half of the total return of many holdings for investors, particularly for those companies that can grow their dividends over time.

Thus, for investors seeking stability (and total returns) over very long time horizons, dividend stocks are a great way to go. In order to pay dividends, these companies obviously have to be profitable. That’s a nice byproduct of selecting companies with stable and growing yields.

Here are two such stocks I think long-term investors should consider right now.

Best dividend stocks in Canada: Fortis

Fortis (TSX:FTS) is a multinational gas and electric utilities company operating in Canada, the U.S., and the Caribbean. For the last quarter, this company declared a dividend payment of $0.56. This indicates a payout ratio of 76.22% and a dividend yield of 4.28%, which is slightly higher than the 2.992% sector average.

Notably, Fortis remains one of the best dividend-growth stocks in Canada, with a track record of hiking its dividend annually for five decades straight. Solid long-term growth has allowed Fortis to do so, with this past quarter being no exception.

Fortis reported strong Q2 numbers, with its net earnings rising to $294 million ($0.61 per share) from $284 million and $0.59 per share during the same period a year prior. Adjusted net earnings were on the rise, and the company continues to invest capital into its core business.

For those looking for stability, Fortis’s regulated revenue streams are about as good as it gets. This is a stock long-term investors want to hold for its dividend and more.

Dream Industrial REIT

Dream Industrial REIT (TSX:DIR.UN) is an open-ended, unincorporated real estate investment trust (REIT), which operates in Canada, the United States, and Europe. Its portfolio consists of 321 industrial assets, which totals around 70.3 million square feet of gross leasable area. 

For August, this REIT declared a dividend worth $0.06/unit. This shows a payout ratio of 123.84% and a dividend yield of 5.02%, which is quite higher than the 3.91% sectorial average.  

That’s a high payout ratio, and the company’s dividend yield above 5% may give some investors reason for concern. However, the company’s diversified high-quality industrial real estate assets do provide some variability when it comes to net income. With growth of more than 20% in the company’s net rental income on a year-over-year basis this past quarter, I think these ratios will come back in line by the end of next year.

Of course, a real estate downturn may hit all sectors at some point. Valuations have gotten extreme in certain markets, and even the most stable corners of the market such as industrial real estate may get hit.

However, over the long term, industrial real estate is an asset class that will only diminish over time. High-quality properties near city centres (such as those owned by Dream Industrial) are only going to become more rare and valuable. This is a company with a simple investing thesis, but one I think will stand the test of time. So, long-term investors may want to consider locking in this 5% yield and riding into the sunset.

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 Dream Industrial Real Estate Investment Trust, Enbridge, and Fortis. The Motley Fool has a disclosure policy.

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