Investing in dividend-paying stocks is a smart strategy to earn regular income. Moreover, top dividend stocks also offer decent capital gains over time, thus boosting investors’ overall returns.
While the TSX has several fundamentally strong stocks that are reliable dividend bets, I’ll focus on stocks with a solid history of dividend payouts and the potential to continue to increase their annual payments over the next decade.
Against this backdrop, let’s look at the smartest dividend stocks one can buy with $400 right now.
Fortis (TSX:FTS) is a top dividend stock for income investors. The company operates a low-risk regulated utility business and generates predictable cash flows. Thanks to its solid cash flows, this utility company has a stellar history of increasing its dividend for 50 consecutive years. Moreover, it expects to grow its annual dividend at a compound annual growth rate (CAGR) of 4–6% through 2028.
Fortis’ payouts are supported by its growing rate base, enabling the company to generate solid cash flows to easily cover them. The secured capital plan will drive its rate base in the coming years. The utility company expects its rate base to increase at a CAGR of 6.3%, which will support its growth. Moreover, most of Fortis’ income is derived through its regulated assets, implying its payouts are well protected.
Enbridge (TSX:ENB) is another top investment for investors seeking worry-free passive income. The company mainly transports oil and gas and has a growing portfolio of renewables. Thanks to its diversified revenue sources, long-term contracts, and utility-like cash flows, Enbridge has consistently enhanced its shareholders’ value through higher dividend payments. Notably, the energy infrastructure company has increased its dividend for 29 years. Notably, its dividend increased at a CAGR of 10% during this period.
Enbridge is well-positioned to capitalize on energy demand through its continued investments in conventional and green energy assets. Further, its high asset utilization rate, power purchase agreements, regulated cost-of-service tolling framework, and $25 billion secured capital program will drive its distributable cash flows and future dividend payments. Enbridge’s payout rate of 60-70% of distributable cash flow is sustainable. Moreover, it offers a lucrative yield of 7.4%.
Canadian Natural Resources
Like Fortis and Enbridge, Canadian Natural Resources (TSX:CNQ) also has a stellar dividend growth history. The oil and natural gas company has increased its dividend for 24 years. What stands out is that its dividend has grown at a CAGR of 21% during the same period, which is impressive.
Its low-risk and high-value reserves, diversified asset base, solid balance sheet, and low debt-to-adjusted funds flow ratio position it well to grow its earnings and cash flows at a solid pace. Further, this will allow the energy giant to enhance its shareholders’ returns through higher dividend payments in the future.
Telus (TSX:T) is the final stock on this list. The telecom company is popular for its robust payouts in all market conditions. It’s worth highlighting that Telus has regularly enhanced its shareholders’ value via its multi-year dividend-growth program. It distributed over $1.5 billion in dividends during the first three quarters of 2023. Further, it has paid about $19 billion in dividends since 2004.
The company’s ability to deliver profitable growth supports its payouts. Further, its growing customer base, lower churn, and expansion of 5G coverage and PureFibre footprint will likely drive its earnings and dividend payments. Telus stock currently offers a yield of 5.9%.