Shares of dividend-paying companies are viable investment options for earning steady passive income. Thankfully, several fundamentally strong Canadian stocks pay dividends. Moreover, a few have consistently paid and increased their payouts for years, making them a reliable bet for worry-free income.
So, if you plan to buy dividend stock in May 2024, here are my top five picks with stellar dividend payment history and well-covered payouts.
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Stock #1
I will start with the shares of a leading Canadian Bank. It’s worth highlighting that top Canadian banks have been paying dividends for more than 100 years, and one among them is Toronto-Dominion Bank (TSX: TD). It has paid uninterrupted dividends for 167 years, making it a compelling stock for passive-income investors. Notably, the financial services company has increased its dividends at a compound annual growth rate (CAGR) of around 10% since 1998, the highest among its banking peers.
It offers an attractive yield of over 5%. Moreover, its payout ratio of 40-50% is sustainable in the long run. Overall, Toronto-Dominion Bank’s growing earnings base and sustainable payout ratio suggest that it could continue to enhance its shareholders’ returns through regular dividend payments.
Stock #2
Like banks, top Canadian energy companies should be on your radar for passive income. They are known for paying and increasing their dividends for decades. Within the energy sector, Enbridge (TSX:ENB) is a dependable bet. It is known for paying and raising its dividend in all market conditions. For instance, this energy company increased its dividend for 29 consecutive years at a CAGR of 10%.
Besides a stellar dividend payment history, Enbridge offers a compelling yield of more than 7%, which supports my optimistic outlook. Enbridge will likely benefit from long-term contracts, power-purchase agreements, multi-billion secured projects, and strategic acquisitions. Moreover, it is well-positioned to increase its dividend by mid-single-digit rate in the long term.
Stock #3
Besides Enbridge, investors could consider Canadian Natural Resources (TSX:CNQ) stock in the energy space for passive income. Canadian Natural Resources is famous for rapidly growing its dividends. For instance, it has grown its dividend at a CAGR of 21% in the last 24 years, which is impressive.
CNQ’s ability to increase production, long-life assets, high-value reserves, and disciplined capital-allocation strategy enables it to generate significant earnings and free cash flows. This allows it to pay and increase its dividend regardless of market and commodity cycles. Currently, it offers a healthy yield of about 4%.
Stock #4
Let’s turn to utility companies famous for their dividend payments. Investors could consider Fortis (TSX:FTS) among the top Canadian utility companies, which has increased its dividend for five consecutive decades. This electric utility operates a low-risk business that generates predictable cash flows. Fortis’s future payouts look well-covered thanks to its defensive business model and ability to generate consistent cash flows. Besides paying a dependable dividend, Fortis offers a reliable yield of about 4.4%.
The company is focused on expanding its rate base, which will likely drive earnings and support future distributions. The utility company plans to grow its rate base by about 6.3% annually through 2028. This will enable Fortis to expand its earnings and increase its dividend by 4-6% annually during the same period.
Stock #5
Canadian Utilities (TSX:CU) is another lucrative stock from the utility sector for passive income. The company boasts an impressive record of 51 consecutive years of dividend increases — the longest among all Canadian companies. Moreover, it offers a high yield of over 5.8%.
Its highly regulated and contracted asset base helps the company generate strong earnings that support higher dividend payments. Moreover, the firm’s ongoing investments in regulated utility assets will likely expand its earnings base and provide a solid foundation for future dividend payments. Additionally, its focus on commercially secured capital projects augurs well for growth and will likely drive its financials and payouts.
