3 Safe Dividend Stocks to Beat Inflation

These three dividend stocks are excellent buys to beat inflation, given their solid underlying businesses and high yields.

| More on:
protect, safe, trust

Image source: Getty Images

Canada’s annual inflation rate declined to 2.9% in January from 3.4% in December, lower than analysts’ expectations of 3.3%. Although inflation shows signs of easing, it is still higher than the Federal Bank’s guidance of 2%. With inflation eating into your pockets, you can lower the impact by investing in high-yielding dividend stocks that generate a stable passive income. Meanwhile, here are my three top picks.

Enbridge

Speaking of safe dividend stocks, Enbridge (TSX:ENB) is the first stock that comes to my mind, given its excellent track record. The midstream energy infrastructure company transports oil and natural gas across North America through its pipeline network. It is also growing its renewable energy and natural gas utility assets. With around 97% of its cash flows generated from cost-of-service and take-or-pay contracts, the company generates stable and predictable cash flows. Around 80% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) is inflation-indexed, thus shielding its financials from rising commodity prices.

The Calgary-based energy company has paid dividends uninterruptedly for 69 years and raised them for 29 previous years. It currently pays a quarterly dividend of $0.915/share, with a forward yield of 7.62%.

Further, Enbridge recently acquired East Ohio Gas Company and is currently working on acquiring two other natural gas utility assets. These acquisitions could increase its cash flows from high-quality, low-risk utility assets, thus further stabilizing its cash flows. The company’s management expects to put $4 billion of assets into service annually in 2024 and 2025. Given Enbridge’s healthy growth prospects, its future dividend payouts look safer, making it attractive.

BCE

Another high-yielding dividend stock that will help you beat inflation would be BCE (TSX:BCE), which offers a juicy dividend yield of 8.56%. Given its stable cash flows due to recurring revenue streams, the Montreal-based telecommunication company has raised its dividend for 16 consecutive years. The demand for telecommunication services is rising amid digitization. The company has also strengthened its 5G and broadband infrastructure to capture the growing demand.

However, BCE has been under pressure over the last few months. The CTRC (Canadian Radio-television and Telecommunications Commission) has mandated large telecom companies to share their fibre-to-the-home (FTTH) networks with smaller players to increase competition and lower customer prices. The announcement would hurt telcos, such as BCE, which have invested aggressively in expanding their broadband network. The company has lost close to 30% of its stock value compared to its last year’s highs and is trading at an attractive NTM (next 12-month) price-to-earnings multiple of 15.2. Despite the near-term weakness, I am bullish on BCE, given its long-term growth potential and attractive dividend yield.

Pizza Pizza Royalty

My final pick is Pizza Pizza Royalty (TSX:PZA). It has adopted a highly franchised business model and operates 774 restaurants through its franchisees. It collects royalty from these franchisees based on their sales. So, rising prices and wage inflation will not impact its financials. Instead, increased menu prices amid rising expenses could boost its royalty pool income.

Further, the company is expanding its footprint by adding new restaurants. From January 1, it added 45 new restaurants to its royalty pool and removed 14 restaurants that had ended their operations. New product launches, marketing initiatives, and renovations of old restaurants could boost sales, driving royalty income. So, the Toronto-based company is well-positioned to continue rewarding its shareholders through high dividend yields. Currently, it offers a monthly dividend of $0.0775/share, with its forward yield at 6.77%.

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 Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

REITs with modest amounts of debt, like Killam Apartment REIT (TSX:KMP.UN), can be good investments.

Read more »

Technology
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

Some of the smartest buys investors can make with $500 today are stocks that have upside potential and pay you…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Dividend Stocks to Buy in April for Safe Passive Income

These TSX Dividend stocks offer more than 5% yield and are reliable bets to generate worry-free passive income.

Read more »

protect, safe, trust
Dividend Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $1,000

If you've only got $1,000 on hand, that's fine! Here is how to make a top-notch, passive-income portfolio that could…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

CPP Insights: The Average Benefit at Age 60 in 2024

The average CPP benefit at age 60 in average is low, but claiming early has many advantages with the right…

Read more »

thinking
Dividend Stocks

Why Did goeasy Stock Jump 6% This Week?

The spring budget came in from our federal government, and goeasy stock (TSX:GSY) investors were incredibly pleased by the results.

Read more »

woman analyze data
Dividend Stocks

My Top 5 Dividend Stocks for Passive-Income Investors to Buy in April 2024

These five TSX dividend stocks can help you create a passive stream of dividend income for life. Let's see why.

Read more »

investment research
Dividend Stocks

5 Easy Ways to Make Extra Money in Canada

These easy methods can help Canadians make money in 2024, and keep it growing throughout the years to come.

Read more »