The Canadian equity markets are upbeat this year, with the S&P/TSX Composite Index rising 4.8%. Strong quarterly performances from prominent companies, signs of easing inflation, and the strengthening of commodity prices have boosted investors’ confidence, driving equity markets higher. However, rising geopolitical tensions and expectations of a global slowdown amid higher interest rates are causes of concern.
If you are also worried about these issues, add quality dividend stocks to strengthen your portfolio and earn a stable passive income.
Here are my two top picks.
TC Energy
TC Energy (TSX:TRP) is a Calgary-based energy company. It transfers oil and natural gas across North America through a pipeline network and has invested in seven power-generating facilities, with a total production capacity of 4.3 gigawatts. Last month, the company reported a solid fourth-quarter performance, with its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) growing by 16% year-over-year.
The midstream energy company put $5.3 billion of projects into service last year. The expansion of its asset base and solid operating performances with higher utilization rates drove its financials. Besides, the company sold $5.3 billion worth of assets last year, strengthening its financial position. Advancing its $3 billion divestment plan, it sold the Portland Natural Gas Transmission System for US$1.1 billion earlier this month. Further, the company has announced that it is progressing towards achieving its targeted debt-to-EBITDA ratio of 4.75 by the end of this year.
Notably, TC Energy is continuing its asset expansion plan and expects to put $7 billion and $9 billion of projects into service this year and next. Amid these growth initiatives, the company hopes to grow its adjusted EBITDA at a CAGR of 6% through 2026, excluding its liquids pipeline segment. Meanwhile, the company is working on spinning off its liquids pipeline segment to enhance shareholder value. Considering all these factors, I believe TRP stock, which has raised its dividends at an annualized rate of 7% for the last 24 years, could continue its dividend growth. Besides, it currently offers a forward dividend yield of 6.98%, making it an excellent buy for income-seeking investors.
BCE
Another top dividend stock I am bullish on would be BCE (TSX:BCE), one of Canada’s three top telecom players. With telecom companies earning stable cash flows from their recurring revenue streams, the company has raised its quarterly dividend for 16 consecutive years.
Meanwhile, the telecom has been under pressure over the last few months amid unfavourable regulatory decisions by the CTRC (Canadian Radio-television and Telecommunications Commission). BCE has lost close to 30% of its stock value compared to its 52-week high, thus dragging its NTM (next 12 months) price-to-earnings multiple to an attractive 15.7. Besides, the sell-off has raised its forward dividend yield to a juicy 8.28%.
However, the demand for telecommunication services is rising amid digitization. BCE is strengthening its 5G and broadband asset base to expand its market share and boost its sales. Also, higher initial capital investments and regulatory approvals have restricted new entrants, thus allowing existing players to enjoy their market share and drive their financials. So, I believe BCE’s future dividends are safe, making it an attractive buy.
