After solid fourth-quarter returns, the global equity markets have turned volatile this year. Although inflation is showing signs of easing, core inflation remains higher. Several analysts are predicting a global slowdown this year due to the impact of monetary tightening initiatives. Given the uncertain outlook, investors should strengthen their portfolios by adding quality stocks that pay dividends at a healthier rate.
Given their stable cash flows, healthy growth prospects, and high dividend yields, I am bullish on the following three stocks.
Enbridge
Enbridge (TSX: ENB) is one of my top picks, given its solid track record of raising dividends and high yield. The midstream energy company earns around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from long-term contracts, and around 80% of its adjusted EBITDA is inflation-indexed. The company has successfully achieved its guidance for 18 consecutive years. Supported by its stable performances, the Calgary-based company grew its dividend for 29 straight years, with its forward yield currently at 7.79%.
After putting $2 billion worth of projects into service last year, Enbridge is continuing with its $24 billion secured capital program. It expects to put $4 billion of projects into service annually in 2024 and 2025. Further, it is working on acquiring three natural gas utility companies in the United States for $12.8 billion and is hopeful of closing the deal later this year. The company has strengthened its financial position by divesting non-core assets worth $3.1 billion. Its debt-to-EBITDA ratio stands at 4.1, lower than its guidance of 4.5 to 5. Further, it is currently trading at an attractive NTM (next-12-month) price-to-earnings multiple of 16.8, making it an excellent buy at these levels.
Pizza Pizza Royalty
The second dividend stock I am bullish on is Pizza Pizza Royalty (TSX: PZA), which operates Pizza Pizza and Pizza 73 brand restaurants. The company operates its restaurant through franchisees, collecting royalties based on their sales. So, its financials are less susceptible to rising commodity prices and wage inflation. The company has posted solid same-store sales growth of 9.8% in the first three quarters of 2023, allowing it to raise its dividend three times last year. The company currently pays a monthly dividend of $0.0775/share, with its forward yield currently at 6.56%.
Meanwhile, from January 1, the company has added 45 new restaurants to its royalty pool while removing 14 restaurants that ended their operations. The company has accelerated the construction of new restaurants and the renovation of old restaurants. All these initiatives could boost its sales, thus driving its royalty pool income. Given its asset-light business model, stable cash flows, and an NTM price-to-earnings multiple of 15.6, I believe Pizza Pizza Royalty would be an excellent addition to your portfolio.
Telus
Telecommunication companies are excellent dividend stocks to have in your portfolio due to their steady cash flows and resilient long-term growth prospects. High initial investments and the need for regulatory approvals hinder new entrants to the sector, thus allowing existing players to enjoy their market share.
However, CTRC (Canadian Radio-television and Telecommunications Commission) recently announced that small internet service providers could provide their services utilizing the fibre networks of large telecoms. The announcement and rising interest rates have weighed on the sector, including Telus (TSX: T), which has lost around 16% of its stock value compared to its 52-week high. Amid the recent correction, the company trades at 1.7 times its projected sales for the next four quarters.
Meanwhile, the need for telecommunication services is rising amid digitization. The company is expanding its 5G and broadband infrastructure to expand its customer base. In November, the company acquired additional spectrum licenses for $620 million, which could allow it to expand its 5G services across the country. So, given its healthy growth prospects, I believe the company’s future dividend payouts are safer. With the company currently paying a quarterly dividend of $0.3761/share, its forward yield stands at 6.22%.
