Investing in dividend-paying stocks could be a solid strategy for investors looking for regular cash inflows. However, while selecting the top stocks to start an income stream, investors should look for companies with solid fundamentals, an impressive history of dividend payments and growth, and the ability to grow their payouts in the future.
Further, it is essential to diversify your portfolio to reduce risk and earn consistent income in all market conditions.
With that backdrop, let’s look for the best dividend stocks in Canada which are fundamentally strong, have a solid dividend distribution history, and have visibility over their future payouts. Let’s begin
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Enbridge
Enbridge (TSX: ENB) is one of the best dividend stocks for investors seeking a reliable income stream. This pipeline company transports hydrocarbons like oil and gas and has a stellar dividend payment history of 68 years. Moreover, it has uninterruptedly grown its dividend for over 28 years. The company anticipates its distributable cash flow to increase at a CAGR (compound annual growth rate) of around 3% through 2025. Further, it plans to grow its dividend at a similar pace.
Enbridge’s diversified asset base, utility-like cash flows, and long-term contracts position it well to generate solid distributable cash flows, enabling it to grow its payouts. Further, its regulated cost-of-service tolling framework, multibillion-dollar secured capital program, and high utilization of assets augur well for growth.
Fortis
Like Enbridge, Fortis (TSX: FTS) is also a dependable passive income stock. The regulated utility company has an impressive dividend growth history of 50 years. Furthermore, it expects to grow its annual dividend at a CAGR of 4–6% through 2028, which is encouraging.
The company’s ability to generate predictable cash flows and solid rate base growth positions it well to grow its earnings and dividend payouts. Moreover, it earns nearly 99% of its income through regulated assets, implying its payouts are safe and sustainable in the long term.
TC Energy
Investors could consider buying the shares of TC Energy (TSX: TRP). This pipeline company is a Dividend Aristocrat and has hiked its dividend for 23 years. Its regulated and contracted asset base and focus on renewables position it well to generate solid earnings and enhance its shareholders’ returns through higher payouts.
Recently, TC Energy announced a strategic decision to spin off its Liquids Pipelines business, creating two distinct energy infrastructure companies. This will enable it to capitalize on energy transition opportunities, improve operational efficiencies, and generate incremental value. The initial total dividends from these two entities will equal its current annual payout. Moreover, the company intends to consistently increase its dividend in the years ahead.
AltaGas
AltaGas (TSX: ALA) is another lucrative dividend stock to earn regular income. The company owns a low-risk utility business that enables it to consistently pay and increase its dividend. Moreover, it also operates a high-growth midstream business that supports its financials and payouts.
AltaGas expects to grow its rate base by 8–10% annually through 2027. This will drive its future earnings and dividend payments. Thanks to its growing rate base, AltaGas plans to increase its dividend by 5–7% per annum during the same period. Overall, its well-diversified business and visibility over future payouts make AltaGas a solid income stock.
Toronto-Dominion Bank
The final stock on this list is Toronto-Dominion Bank (TSX: TD). The financial services giant has been paying a dividend for 166 years, making it one of Canada’s best dividend stocks. Further, the bank’s dividend has grown at a CAGR of approximately 11% over the past 25 years, the highest among its peers. Furthermore, it has a conservative payout ratio of 40–50%.
In the future, Toronto-Dominion Bank’s diversified revenue base, solid balance sheet, focus on improving efficiency, and accretive acquisitions will drive its earnings. This performance will enable Toronto-Dominion Bank to enhance its shareholders’ value via higher dividend payments.
