Investors seeking safe passive income could consider investing in shares of top dividend-paying companies. It’s worth noting that several Canadian stocks have been consistently paying and increasing their dividends for decades. This makes them a reliable bet for passive-income investors.
With this background, let’s look at the shares of the two fundamentally strong Canadian companies to buy in April. These stocks boast a stellar dividend distribution history. Also, these companies have a growing earnings base, implying they could continue to enhance their shareholders’ return through dividend hikes.
Enbridge
Speaking of safe passive income stocks, one could consider investing in Enbridge (TSX:ENB) stock. The energy infrastructure company is famous for paying and growing its dividend regardless of the economic or commodity cycles. This makes it a dependable stock to generate worry-free income.
Enbridge transports oil and gas. Further, it owns a growing portfolio of renewable energy assets. Notably, the company has been paying regular quarterly dividends for over 69 years. Moreover, this energy company has raised the dividend for 29 consecutive years at a compound annual growth rate (CAGR) of 10%. Enbridge’s dividend growth is much higher than its peers. However, what stands out is its lucrative dividend yield of 7.87% (calculated on its closing price of $46.53 on April 15), which serves as an effective hedge against inflation.
Enbridge’s dividend distribution history reflects the durability of its payouts and its ability to grow its distributable cash flows (DCF) and earnings. Adding to the positives, Enbridge operates a relatively resilient business model and benefits from higher asset utilization, long-term contracts, and power-purchase agreements. Moreover, its continued investments to expand its conventional and renewable energy assets position it to capitalize on the energy demand.
Looking ahead, Enbridge’s management expects its earnings and DCF per share to increase by 5% in the long term. This will enable it to grow its dividend at a mid-single-digit rate. While Enbridge is poised to enhance its shareholders’ value through higher dividends, the company’s payout ratio is sustainable in the long term.
Toronto-Dominion Bank
Sporting a market cap of over $138 billion and a solid dividend payment history, Toronto-Dominion Bank (TSX: TD) is another safe and reliable stock to earn passive income. This leading Canadian bank has been paying uninterrupted dividends for 167 years. Furthermore, Toronto-Dominion Bank has increased quarterly dividends at a CAGR of around 10% since 1998, the highest among its banking peers.
The financial services giant’s stellar dividend payouts are supported by its ability to consistently grow earnings. Its diversified revenue sources, high-quality loans, solid deposit base, and strategic acquisitions drive its top line. Further, steady credit performance and operating efficiency cushion its earnings and drive its payouts.
Toronto-Dominion Bank expects its adjusted earnings per share to increase by 7-10% in the medium term. Further, the bank expects positive operating leverage during the same period, which will drive its earnings. The bank’s growing earnings base will support higher payouts. Moreover, its payout ratio of 40-50% is sustainable in the long run.
Besides reliable payouts, Toronto-Dominion Bank offers an attractive yield of over 5%.
