Bulletproof Income: How to Earn Safe Dividends With Just $10,000

Investors planning to build a bulletproof income portfolio should consider dividend stocks with the potential to sustain and increase payouts for years under all market conditions. Thankfully, the TSX has several such fundamentally strong companies known for their resilient payouts and commitment to return cash to their shareholders. 

With this background, let’s discuss three Canadian stocks that could help you create a reliable income portfolio with just $10,000. These stocks have relatively resilient business models and a growing earnings base that could help deliver stable dividends.

Stock#1

Investors eyeing safe dividends could consider investing in Enbridge (TSX: ENB) stock. This oil and gas transportation company has uninterruptedly paid and increased its dividend in all market conditions for decades. The durability of its payouts reflects the company’s highly diversified revenue streams, growing earnings base, and ability to generate solid distributable cash flows (DCFs).

Enbridge has paid dividends for nearly 69 years and raised them for 29 consecutive years. Further, it offers an impressive yield of over 7% near the current market price. 

Enbridge’s power-purchase agreements, long-term contracts, and high asset utilization rate help generate solid DCFs that cover its dividend payouts. Further, it is poised to capitalize on growing energy demand through its investments in both conventional and renewable energy assets. In addition, Enbridge’s multi-billion-dollar secured capital projects and strategic acquisitions will likely support its growth and future dividend payments.

Enbridge’s management expects its earnings and DCF per share to increase by 5% in the long term. This will enable the company to grow its dividend at a mid-single-digit rate. Also, its payout ratio of 60 to 70% of DCF is sustainable in the long term.  

Stock#2

Speaking of safe income stocks, Fortis (TSX: FTS) should be on your radar. Fortis operates a regulated electric utility business. Thanks to its ability to generate predictable cash flows, Fortis has consistently enhanced its shareholders’ value through higher dividend payments. For instance, this utility company boasts a dividend growth history of 50 years. Moreover, it offers a well-protected yield of 4.34%.

Fortis’ payouts are supported by its low-risk business model and growing rate base, which help it generate robust cash flows and, in turn, offer higher dividend distributions. Meanwhile, its diversified regulated utility asset base accounts for all its earnings, implying its distributions are well covered. 

The utility company is focusing on growing its rate base, enabling it to enhance shareholders’ returns through higher dividend payments. Fortis plans to expand its rate base at a compound annual growth rate (CAGR) of 6.3% through 2028. At the same time, the company is confident of raising its dividend at an annualized rate of 4 to 6%. The visibility over its future payments supports my bull case. 

Stock#3

Toronto-Dominion Bank (TSX: TD) is a dependable income stock in the financial services sector. This leading Canadian bank has been paying dividends consistently for 167 years and has raised it at a CAGR of about 10% since 1998. The firm’s dividend growth rate is the highest among its peers. 

While Toronto-Dominion Bank has a solid dividend payment history, its low payout ratio of 40 to 50% suggests that its future distributions are sustainable in the long term. 

The bank’s high-quality assets, diversified revenues, and focus on improving efficiency will likely drive its earnings and support regular dividend distributions. Further, its growing loans, solid deposit base, robust balance sheet, and strong credit quality augur well for long-term growth. 

Bottom line 

Enbridge, Fortis, and Toronto-Dominion Bank stocks are dependable investments to earn worry-free passive income. A $10,000 investment distributed equally in these three stocks can help you create a bulletproof income portfolio and generate a dividend of $139 per quarter.