Investing in dividend stocks generates a regular income stream, making it attractive for investors seeking a steady cash inflow. Besides providing regular income, fundamentally strong dividend-paying companies have the potential to deliver notable capital gains over time and add stability to your portfolio.
So, for investors planning to invest in dividend stocks in April 2024, here are my top five picks.
A top bank stock
Leading Canadian banks are a top choice for income investors as they have been uninterruptedly paying dividends for several decades. Within the banking space, Bank of Montreal (TSX:BMO) stands out for its stellar dividend payment history. The financial services giant has been paying dividends for 195 years, the longest by any Canadian company. Also, its dividends have grown at a compound annual growth rate (CAGR) of 5% in the last 15 years.
Bank of Montreal’s diversified revenue streams, loan expansion, growing deposit base, market share growth, and operational efficiency drive its earnings and, in turn, dividend payments. The financial services giant remains on track to expand its earnings at a CAGR of 7 to 10% in the medium term. This positions the bank well to increase its dividend at a mid-single-digit rate during the same period.
2 utility stocks
From banks, let’s move toward utilities, which are renowned for their ability to generate predictable cash flows and solid track records of consistently growing dividend payments in all market conditions. Investors could consider adding shares of Canadian Utilities (TSX:CU) and Fortis (TSX:FTS) from the utility sector.
Coming to Canadian Utilities, it boasts the longest history of uninterrupted dividend growth among all publicly traded Canadian companies. With an impressive streak of 51 consecutive years of dividend increases, it stands as one of the top dividend stocks in Canada. Its portfolio of highly contracted assets and regulated earnings base provide a solid foundation for dividend growth. The company continues to invest in regulated utility and contracted assets, which will expand its earnings and dividend payouts.
Similar to Canadian Utilities, Fortis is a no-brainer dividend stock. It has increased its dividend for 50 consecutive years. Moreover, the utility giant expects to increase its dividend at a CAGR of 4 to 6% through 2028. Fortis projects its rate base to increase at a CAGR of 6.3% through 2028. This will expand its earnings base and position it well to grow its dividend payouts.
2 energy stocks
Canadian Energy stocks are famous for their stellar dividend payment history. Enbridge (TSX:ENB) and Canadian Natural Resources (TSX:CNQ) are top energy stocks for earning worry-free dividends. These stocks also offer high yields.
Enbridge’s diversified revenue stream, high utilization of its assets, contractual arrangements, and power-purchase agreements position it well to deliver distributable cash flow (DCF), which supports its dividend payouts. The company has increased its dividend for 29 consecutive years. Further, ENB stock offers a compelling yield of more than 7%. Enbridge expects its DCF per share to grow at a CAGR of 5% in the long term, positioning it well to increase its dividend at a mid-single-digit rate.
Canadian Natural Resources has raised its dividend for 24 consecutive years. What stands out is that this oil and gas company’s dividend grew at a CAGR of 21% during the same period. Canadian Natural Resources’ long-life assets, high value reserves, and low maintenance capital requirement position it well to generate strong earnings irrespective of the commodity cycle. This enables the company to increase its dividends at a decent pace and return cash to its shareholders.
