Dividend investing is a long-term strategy because the objective is usually to grow a nest egg or secure one’s financial future. However, an investment strategy built on dividend income means the sources of cash flow must be reliable regardless of the economic environment.
Canadian Utilities (TSX:CU), Canadian Western Bank (TSX:CWB), and Imperial Oil (TSX:IMO) can form your passive-income portfolio. These stocks are among Canada’s top dividend payers. They can turn your investments into lifelong income or retirement paycheques.
The King
Canadian Utilities’ enthronement as TSX’s first dividend king happened in 2022. Raising dividends annually for 50 consecutive years is an extraordinary feat considering the multiple recessions and economic downturns the stock went through. The dividend hike in 2023 extended the dividend growth streak to 51 years.
This $8.3 billion diversified multinational energy infrastructure corporation caters to customers in Canada, Mexico, Puerto Rico, and Australia. The regulated utility assets provide strong foundational earnings even if the utility sector is sensitive to interest rate movements.
Utilities is the core business but CU also offers comprehensive solutions in energy infrastructure and retail energy. Based on the current three-year capital investment plan, the mid-year rate base should grow by 2% from $14.9 billion in 2022 to $16 billion by year-end 2025.
In January 2023, CU acquired two operating wind assets and a development pipeline of wind and solar projects. According to management, building the renewables portfolio provides immediate scale, and the long-term contracted assets will bring additional cash flow and earnings. At $29.91 per share, Canadian Utilities pays a lucrative 6.06% dividend.
Business owners’ bank of choice
Canadian Western Bank is outside the Big Bank circle but its dividend growth streak of 31 years is unmatched by its larger industry peers. For $28.61 per share, you can partake in the 4.61% dividend. The quarterly dividends should be safe, given the low 38.46% payout ratio.
The $2.8 billion full-service bank focuses on and addresses the financial business of business owners, including the underserved mid-market commercial segment. In fiscal 2023 (12 months ending October 31, 2023), revenue and net income rose 3.4% and 4.1% year over year respectively to $1.1 billion and $350.6 million.
Management said most of the planned organizational redesign activities in Q4 2023 are almost complete. For fiscal 2024, CWB expects to deliver mid-single-digit annual percentage growth on loans and branch-raised deposits.
Sustainable payouts
Besides the 69.6% ownership stake by American oil giant Exxon Mobil, Imperial Oil is Canada’s second-largest integrated oil company. At $78.50 per share, the 3.06% dividend yield isn’t tops but decent and ultra-safe. Moreover, the $42 billion company is a dividend aristocrat owing to 29 consecutive years of dividend growth.
In Q4 and full year 2023, net income declined 21% and 33.4% year over year respectively to $1.4 billion and $4.9 billion. Nevertheless, its Chairman, President, and CEO, Brad Corson, said, “Our strong 2023 financial results were underpinned by solid operational performance across all of our businesses highlighted by record production.” IMO also announced a 20% increase in its quarterly dividend.
Stable passive-income portfolio
Canadian Utilities is the ideal cornerstone for building passive income. Income-oriented investors can include Canadian Western Bank and Imperial Oil to spread risks and add stability. Their share prices will fluctuate but the dividend payouts should be consistent.
