Investors who got burned chasing the cannabis story should forget about trying to time new surges and consider generating steady returns from undervalued utility and telecom stocks that currently offer attractive yields and continue to raise their dividends.
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Enbridge
Enbridge (TSX:ENB) is best known for its vast oil and natural gas transmission networks that move 30% of the oil produced in Canada and the United States and 20% of the natural gas used by American homes and businesses. The company owns or has interests in energy export facilities, renewable energy assets, and natural gas distribution utilities. A US$14 billion acquisition of three natural gas utilities in the United States is expected to close this year. The deal will make Enbridge the largest player in the sector in North America.
Enbridge trades near $46.50 per share at the time of writing. This is down from $59 at the peak in 2022, so there is decent upside potential on the next rebound.
The decline in the share price is largely due to rising interest rates. Higher borrowing costs put a dent in profits and can reduce cash available for distributions. The Bank of Canada and the U.S. Federal Reserve are expected to start cutting interest rates at some point in 2024. As soon as that begins to happen, Enbridge could move meaningfully higher.
The board increased the dividend by 3.1% for 2024. This is the 29th consecutive annual dividend hike. Investors who buy ENB stock at the current level can get a 7.9% dividend yield.
BCE
BCE (TSX:BCE) also raised its dividend by 3.1% for 2024. The company is going through a streamlining process that will see the business shed 4,800 jobs in 2024 on top of the 1,300 positions it cut in the second half of last year. Challenges in the media group are driving the reduction in expenses as ad spending on television and radio declines.
Despite the headwinds in the media group, BCE’s overall business delivered solid results in 2023 that met guidance. Revenue and free cash flow both grew, supported by the strength of the core mobile and internet subscription businesses.
The drop in the share price looks overdone. BCE trades near $51 per share compared to $65 in May last year. Investors who buy the dip can get a 7.8% dividend yield.
Fortis
Fortis (TSX:FTS) is a Canadian utility company with $66 billion in assets located across Canada, the United States, and the Caribbean. The businesses include power-generation facilities, electric transmission networks, and natural gas distribution utilities. Nearly all of the revenue comes from rate-regulated businesses, so cash flow tends to be reliable and predictable.
Fortis has a $25 billion capital program on the go that is expected to boost the rate base by a compound annual rate of about 6% over five years. This should support planned dividend hikes of 4-6% per year through 2028. That’s good guidance in a challenging economic environment.
Fortis raised the dividend in each of the past 50 years. The stock trades near $53.50 at the time of writing compared to the 12-month high of $62. Investors can now get a 4.4% dividend yield.
The bottom line on top TSX dividend stocks
Ongoing volatility should be expected until interest rates begin to decline. However, Enbridge, BCE, and Fortis pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks look cheap today and deserve to be on your radar.
