Due to no regular income, retirees will have less appetite for risk-taking. So, retirees should invest in quality dividend stocks to generate a stable passive income and shield their portfolios against volatility. Meanwhile, here are two top dividend stocks that I am bullish on due to their predictable cash flows, excellent record of paying dividends, and over 7% of dividend yield.
Enbridge
Enbridge (TSX:ENB) owns and operates a pipeline network that transports oil and natural gas across North America. With a substantial percentage of its revenue generated from long-term take-or-pay contracts, the company generates stable and predictable financials and cash flows irrespective of the broader market environment. The midstream energy company has paid dividends for 69 years amid stable cash flows. Also, it has raised its dividend at an annualized rate above 10% for 29 consecutive years. With a quarterly dividend of $0.915/share, its forward yield currently stands at 7.75%.
Further, Enbridge acquired the East Ohio Gas Company, which serves around 1.2 million customers across 400 communities in Ohio. The company is working on acquiring two other utility assets in the United States, which would make it the largest natural gas utility company in North America. Enbridge also continues its $24 billion secured capital program and expects to put $4 billion of projects into service annually in 2024 and 2025. These growth initiatives and increased contributions from low-risk utility assets will boost its cash flows in the coming quarters, thus making its future dividend payouts safer.
Also, Enbridge’s financial position looks healthy, with its net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) 4.1 at the end of last year. The company further strengthened its financial position by selling its stake in the Alliance Pipeline for $3.1 billion. Despite its healthy growth prospects and high yield, the company trades an NTM (next-12-month) price-to-earnings multiple of 16.8, making it an attractive buy.
BCE
Despite the near-term weakness, I have selected BCE (TSX:BCE) as my second pick. The telecom sector is a capital-intensive business. So, rising interest rates have put pressure on the industry. The CTRC (Canadian Radio-television and Telecommunications Commission) has mandated large telcos to share their fibre-to-the-home (FTTH) networks with smaller service providers to increase competition. However, the decision would disincentivize companies, such as BCE and Telus, that have invested aggressively in expanding their broadband infrastructure.
Meanwhile, given the rising demand for telecommunication services amid digitization, the sector’s long-term growth prospects look healthy. Further, the requirement for regulatory approvals and high initial capital investments deter new players from entering the industry, allowing existing players to enjoy their market share.
Further, BCE recently acquired 939 licenses, which could allow it to expand its 5G infrastructure across the country. Its growing customer base and ARPU (average revenue per user) could boost its financials in the coming quarters. Also, the company has slashed its capital expenditure on fibre network expansion amid the CTRC’s decision. So, the company could utilize its free cash flows to reward its shareholders and lower its debt levels.
BCE raised its quarterly dividend by 3.1% in February to $0.9975/share, marking the 16th consecutive year of dividend hikes. Also, amid the recent selloff, its forward dividend yield has increased to 8.9%, while its NTM price-to-earnings multiple stands at 14.7. Considering all these factors, I believe BCE would be an excellent buy for retirees.
