3 Top Dividend Stocks to Start a Growing Passive Income Stream

Start a growing passive income stream with shares like Canadian Utilities that boast five decades of dividend growth.

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Investors looking for a growing passive income stream could consider shares of fundamentally strong dividend-paying companies. The reason is that these companies consistently increase their distributions regardless of market conditions, enabling investors to earn reliable income that will grow with them. 

Thankfully, the TSX has several such stocks that have consistently increased their dividends for years. However, I’ll restrict myself to three Canadian stocks that have raised dividends for at least two decades. Let’s delve into the stocks. 

Canadian Utilities

Speaking of fundamentally strong companies with stellar track records of dividend payments, Canadian Utilities (TSX:CU) stock immediately comes to mind. This utility and energy infrastructure firm boasts the lengthiest track record of dividend growth among all publicly traded Canadian entities. For instance, Canadian Utilities has raised its dividend for the past 51 consecutive years, making it a compelling investment for investors to start a growing passive income stream. 

Canadian Utilities leverages its diverse revenue streams, anchored by contracted and regulated assets, to generate sustainable earnings and increased dividend distributions. Its management remains committed to continue to invest in regulated utility and energy infrastructure projects, which will drive its future earnings and support higher dividend payments.  

CU stock offers a quarterly dividend of $0.453 per share, translating into a yield of 5.9% based on the closing price of $30.59 on February 27. 

Fortis 

Passive income investors could consider investing in the shares of electric utility company Fortis (TSX:FTS). The firm operates a defensive business that generates predictable cash flows in all market conditions. This makes Fortis stock relatively less volatile and enables it to boost its shareholders’ value through increased dividend payments. 

It’s worth highlighting that Fortis has uninterruptedly increased its dividend for five decades, making it one of the top stocks to start a growing passive income stream. Moreover, Fortis’ payouts are well-covered by its regulated asset base and growing cash flows. 

Fortis expects to grow its rate base at a compound annual growth rate (CAGR) of 6.3% through 2028. This will drive its earnings and future dividend payments. Notably, this utility company plans to grow its annual dividend by 4 to 6% in the medium term. Moreover, it offers a yield of 4.5%. 

Enbridge

Enbridge (TSX:ENB) is the final stock on my list. This Canadian energy infrastructure company has been growing its dividend at a solid pace. Moreover, its resilient business model has allowed the company to increase its dividends regardless of the economic situation. 

Investors should note that this Dividend Aristocrat has paid dividends for over 69 years. Further, it has increased its dividend every year in the last 29 years. Also, Enbridge’s dividend sports a CAGR of 10%, the highest among its peers.

Enbridge, which transports oil and gas, owns a highly utilized asset portfolio, which drives its distributable cash flows (DCF) and dividend distributions. Also, the power-purchase agreements, cost-of-service tolling arrangements, and diversified income stream support its DCF. The company’s secured growth projects, investments in conventional and renewable energy assets, and acquisitions will likely accelerate its growth and enable Enbridge to pay higher dividends. ENB pays a quarterly dividend of $0.915 a share, reflecting a stellar yield of 7.8%. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.

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