The Organisation for Economic Co-operation and Development (OECD) predicts that global growth could slow down next year amid the impact of monetary tightening initiatives, weaker trade, and a decline in business and consumer confidence. The organization has projected the global economy to grow 2.7% next year, a decline from 2.9% in 2023. Amid the slowdown, the equity markets could turn volatile.
So, investors should be careful while investing through TFSA (Tax-Free Savings Account) as investors’ contribution room grows and declines with the value of their portfolio. Given the volatile environment, investors should look to strengthen their portfolios by adding quality stocks that have raised their dividends consistently, thus depicting their solid underlying business and stable cash flows.
Here are my two top picks that have raised their dividends consistently at a healthier rate.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) owns and operates a diversified asset portfolio across North America, the United Kingdom, and Offshore Africa. Given its long-life, low-decline asset base, effective and efficient operations, and low-cost structure, the company could break even at WTI (West Texas Intermediate) crude trading in the mid US$30s per barrel. Around 60% of its production is high-valued SCO (synthetic crude oil), light crude oil, and NGLs (natural gas liquids).
So, it enjoys healthy cash flows, thus allowing it to raise its dividend consistently. The Calgary-based energy company has increased its dividends twice this year and at an annualized rate of 21% for the previous 24 years. Also, its forward yield currently stands at a healthy 4.50%.
Further, the IEA (International Energy Agency) predicts oil consumption to rise in 2024, thus supporting oil prices. Meanwhile, the five top U.S. banks expect oil prices to remain strong next year, with their median price target for Brent Crude at US$85/barrel. It represents an 8.5% increase from its current levels. Further, CNQ is projecting its production to rise 3-7% next year. So, higher prices and increased production could boost its financials, thus allowing it to maintain its dividend growth. Its valuation also looks attractive, with its NTM (next 12-month) price-to-earnings multiple at 10.3.
Enbridge
Enbridge (TSX:ENB) is a midstream energy company that operates a pipeline network to transport oil and natural gas across North America. Supported by its low-risk business and utility-like earnings, the company has delivered an annualized total shareholders return of 11% since 2002.
It generates stable and predictable cash flows, with 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) generated from cost-to-service contracts and contracted assets. Also, around 80% of its adjusted EBITDA is inflation-indexed, thus shielding against rising prices. Amid these stable cash flows, the company has been paying dividends uninterruptedly for 69 years. Also, the company has raised its dividends at an annual rate of over 10% for the previous 29 years, with its forward yield standing at 7.67%.
Further, Enbridge is continuing its $24 billion secured capital program and expects its EBITDA to grow 4-6% annually until 2025 and 5% after that. Given the visibility of its financial growth, the company could continue rewarding its shareholders through dividend growth.
