The 2 Stocks Every Dividend Investor Should Own for Reliable Cash

Dividend stocks offering consistent and reliable returns can be a crucial asset in any portfolio, especially for income-producing dividend portfolios.

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Canadian investors can access dozens of high-quality, generous, and reliable dividend stocks. But even among this lucrative pool of dividend payers, a few stocks stand out for their dividend histories and long-term dividend sustainability prospects.

And if you are looking for dividend stocks that you can hold in your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) for reliable cash, two stocks are worth looking into.

Canada’s First Dividend King

Even though the Canadian banking sector has institutions that have been paying their dividends for over a century, Canada’s first Dividend King — i.e., the title earned by the company that has raised its dividends for 50 or more consecutive years — went to a utility company. Canadian Utilities (TSX:CU) has become one of the most revered dividend stocks in the country after raising its payouts for 51 consecutive years.

With this kind of dividend history, the reliability of its dividends is all but certain, but the reliability factor is enhanced by its business model. As a utility business, it has access to reliable and stable revenues to fund its dividends.

The company’s payout ratio typically remains relatively healthy, but in the last decade, it has pushed through the 100% mark in three out of 10 years. Another reason to consider this stock is the 23% discount it’s trading at right now.

This discount has been great for the dividend yield, which is currently 5.7%, and for the stock’s valuation. However, the current slump and, more importantly, its performance in the last decade don’t endorse its value as a decent growth stock.

Canada’s oldest dividend payer

Even though many Canadian banks have paid dividends for over 100 years, Bank of Montreal (TSX:BMO) stands out for its longest dividend history. The bank has been paying dividends since 1829. It is also an aristocrat that grew its payouts for 11 consecutive years. However stellar, history shouldn’t be the only endorsement of a stock’s reliable dividends.

Canadian bank stocks are beloved for their dividends because of conservative banking regulations and the stability they offer. This is reflected in the payout ratio of Bank of Montreal as well, which enjoys the dividend safety characteristic of the Canadian banking sector.

Right now, the bank is trading at a modest 15% discount from its 2022 peak and offers its payouts at a yield of about 4.6%. The only troubling thing about the bank is its current valuation, which is significantly higher than most of its peers.

Foolish takeaway

As both dividend payers are Aristocrats, you can’t rely on them to keep consistent with their payouts but can also expect a steady rise in your dividend income from the two stocks. This is highly beneficial from an inflation perspective since your income from these two stocks might rise steadily enough to outpace inflation or at least mitigate its impact.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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