Stock market investing does not just mean buying stock at low prices and selling for higher prices later on for capital gains. By identifying and investing in dividend-paying stocks, you can use your self-directed investment portfolio as a passive income stream.
The TSX boasts plenty of dividend-paying stocks. However, not every dividend stock can be a good pick for creating a passive income stream. You must pick and choose dividend stocks capable of paying distributions regularly under all market environments.
Canadian utility stocks are often a staple in many investment portfolios. With the ability to generate stable and predictable cash flows during all market conditions, utility stocks present reduced risk and relatively safer dividend income. To this end, here are two of Canada’s top utility stocks to consider for a passive income portfolio.
Fortis Inc. (TSX:FTS) is a $26.6 billion market capitalization utility holdings company based in Canada. The international and diversified utility holding business owns and operates several natural gas and electricity businesses.
Operating in Canada, the US, the Caribbean, and Central America, it generates most of its revenue in highly rate-regulated markets. Additionally, most of its contracts are long-term agreements that generate predictable cash flows for the company.
Stable and predictable cash flows translate to fewer surprises for the company’s management to deal with.
This allows Fortis stock to fund growing its dividends and capital programs comfortably. A higher debt load has weighed on the company owing to rising interest rates. That said, it is well-capitalized enough to ride the wave and continue its streak as a top Canadian Dividend Aristocrat. As of this writing, Fortis stock trades for $54.36 per share and pays its shareholders a juicy 4.34% dividend yield.
Algonquin Power & Utilities Corp. (TSX:AQN) might not have a 50-year dividend growth streak like Fortis stock. However, the $5.7 billion market capitalization regulated utility energy company can still be an excellent pick for income-seeking investors.
Algonquin Power & Utilities primarily focuses on using renewable energy assets to generate the power it provides to its customers. As the world continues transitioning to green energy, the company’s business model puts it in an excellent position to benefit from a more environmentally friendly energy industry.
Algonquin stock is not immune to the impact of broader market weakness. The last couple of years have seen it slash its dividends due to issues with its core business segment. However, the sell-off has made it attractively priced, providing promising long-term growth prospects. As of this writing, it trades for $8.26 per share and offers investors payouts at a juicy 7.25% dividend yield.
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Dividend investing can be a smart way to grow your wealth. If you want to accelerate your wealth growth, using dividend reinvestment programs can help you use the money you earn from the dividends to buy more dividend stock.
By doing this, you can increase your dividend income and use the power of compounding to grow your portfolio much faster. To this end, reliable dividend stocks like Fortis and Algonquin can be a strong foundation.