Dividend stocks enable investors to earn regular passive income. However, investors should take caution before putting their savings into dividend stocks, as payouts are not guaranteed. Thus, not all dividend-paying stocks are worth investing in.
Fortunately, the Canadian stock market has several top-quality stocks that have been famous for paying and increasing their dividends for years. These Canadian dividend stocks are backed by companies with relatively resilient business models, growing earnings and cash flows, well-covered payout ratios, and management’s commitment to enhance their shareholders’ value, regardless of market conditions.
With this background, I’ll discuss three such Canadian stocks in this article that can help you earn stable passive income for the next 10 years. However, investors should note that no stock is completely safe and carries risks.
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Stock #1
Speaking of safe dividend stocks, Enbridge (TSX:ENB) is a no-brainer. Its stellar dividend payment history, highly diversified revenue streams, visibility over earnings growth rate, and management’s commitment to returning higher cash to its shareholders make Enbridge a must-have stock for earning steady passive income.
The company has been paying dividends for over 69 years and has uninterruptedly increased it for 29 consecutive years. Adding to the positives, its payout ratio remains well-covered, and it offers a compelling yield of over 7.6% (based on its closing price of $48.43 on April 22).
In the future, Enbridge’s management projects the company’s earnings per share (EPS) and distributable cash flow (DCF) per share to increase at a compound annual growth rate (CAGR) of 4-6% and 3%, respectively, through 2026. Beyond 2026, its EPS and DCF per share are expected to grow at a CAGR of 5%. This suggests that Enbridge will likely increase its dividend at a mid-single-digit rate over the next decade.
Stock #2
Boasting a dividend-growth history of 50 years, shares of electric utility company Fortis (TSX:FTS) could be a solid addition to your portfolio to earn worry-free passive income over the next 10 years. The company’s defensive business model and predictable and growing cash flows position it well to consistently enhance its shareholders’ value through higher dividend payments. Further, its payouts are well-protected by regulated utility assets.
Looking ahead, Fortis will likely benefit from expanding its regulated asset base, which will drive its earnings. The company’s management remains upbeat and expects the company’s rate base to increase at a CAGR of 6.3% through 2028 and reach $49.4 billion ($37 billion in 2023). This expansion will help Fortis to increase its dividend by 4-6% per year through 2028. While Fortis’s dividend is projected to grow, it offers a dependable yield of approximately 4.4%.
Stock #3
Leading Canadian banks have been paying dividends for more than a century, making them reliable investments for passive income. Among top banks, Bank of Montreal (TSX:BMO) stands out for its unmatched dividend payment history. The financial services company paid dividends for over 195 years, the longest by any Canadian corporation. Further, it increased its dividend at a CAGR of 5% in the past 15 years.
The bank’s diversified revenue base, expansion of its loan portfolio, solid deposit base, and operational efficiency enable it to grow its earnings and dividend payments. Bank of Montreal expects its earnings to increase at a CAGR of 7-10% in the medium term. This will enable it to grow its dividend at least at a mid-single-digit rate during the same period. Currently, Bank of Montreal stock offers a dividend yield of over 4.7%.
