Investors looking for income through their investments could consider investing in the shares of fundamentally strong companies offering reliable dividend payouts. Thankfully, the TSX has several companies that emphasize returning cash to their shareholders through increased distributions regardless of market conditions. This makes them a reliable investment to earn worry-free passive income.
With this background, let’s look at three unstoppable Canadian stocks that could pay you for life.
The top stock for passive income
Speaking of dependable dividend stocks, one could consider investing in Canadian energy infrastructure company Enbridge (TSX:ENB). The company is known for its durable dividend distributions regardless of economic situation.
For example, Enbridge has been paying dividends for nearly seven decades. Moreover, it raised its dividend for 29 consecutive years at a compound annual growth rate (CAGR) of 10%. Adding to these positives, this transporter and exporter of oil and gas Enbridge offers a compelling yield of 7.6% based on its closing price of $48.36 on March 8.
Enbridge’s diversified revenue sources, high utilization of its assets, power purchase agreements, and regulated cost-of-service tolling frameworks position it well to generate solid distributable cash flow (DCF) per share, supporting its payouts. Also, its solid secured capital projects and focus on lowering costs augur well for growth.
Enbridge expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to increase at a CAGR of 7-9% in the medium term. Moreover, its earnings per share (EPS) is forecasted to grow by 4-6% annually during the same period, enabling it to expand its dividend by mid-single digits in the coming years.
Fortis
With its solid dividend distribution history and visibility over its future payouts, shares of the electric utility company Fortis (TSX:FTS) emerge as a top choice to earn worry-free income. Fortis operates a regulated and defensive business that generates predictable cash flows, which adds resilience to its financial performance and enables it to enhance its shareholders’ returns through higher dividend payments.
Thanks to its low-risk business, Fortis stock is less volatile even amid large market swings. Meanwhile, the company has raised its dividend for 50 consecutive years.
Looking ahead, Fortis is focusing on expanding its rate base, which will drive its earnings and, in turn, its payouts. The company expects its rate base to increase at a CAGR of 6.3% through 2028. This will enable it to grow its dividend at a CAGR of 4-6% during the same period. While Fortis pays a well-protected dividend, it offers a decent yield of 4.4%.
Toronto-Dominion Bank
Besides Fortis and Enbridge, investors could consider investing in shares of top Canadian banks. The reason is that the large Canadian banks have been paying dividends for decades. Among the financial services giants, one could add shares of Toronto-Dominion Bank (TSX:TD). This bank has uninterruptedly paid dividends for 167 years. Further, it has increased its dividends at a CAGR of about 10% since 1998, the highest among its peers.
Toronto-Dominion Bank’s dividend payouts are supported by its ability to consistently grow its earnings. The bank’s diversified revenue sources, high-quality assets and deposit base, robust balance sheet, and focus on improving efficiency enable it to consistently deliver solid earnings and increase its distributions. Moreover, its payout ratio of 40-50% is sustainable in the long term.
The bank will likely benefit from its growing loans, well-diversified deposit base, solid credit quality, and operating leverage. Its strategic acquisitions will also accelerate its growth rate. By investing in Toronto-Dominion Bank stock near current levels, one can earn a reliable dividend yield of over 5%.
