Whenever you think of investing your money in the Toronto Stock Exchange, one of the main areas of focus long-term investors continue to focus on is dividend stocks. Companies offering stable and consistent dividends over the long term act as bond proxies but with greater capital-appreciation upside potential. Utility stocks are among the groups many investors focus on due to their cash flow durability and stable customer bases.
I’m going to cover three of the top Canada-based utilities I think investors should focus on. These companies don’t get as much love from international investors and thus fly under the radar. With relatively attractive valuations and strong yields, these are three great options for long-term investors to consider to generate passive income now and through retirement.
Fortis
Canada-based Fortis (TSX: FTS) remains one of my top dividend picks for a number of reasons. The company’s electricity and natural gas focus provides energy to customers in both regulated and non-regulated markets. Accordingly, the company’s cash flow profile is extremely stable, and Fortis has been able to use these cash flows to pay ever-increasing dividends to investors over the decades.
In fact, Fortis is among the rare utility companies that have raised dividend distributions for five consecutive decades. That’s no small feat. And with a dividend yield of roughly 4.2%, this is a stock with a yield that roughly approximates the long bonds, at least in the Canadian market.
For those looking for stable and consistent performance, alongside rising dividend income each and every year, Fortis remains a top option to consider. Until folks turn off their gas stoves and stop heating their houses and keeping the lights on, this is a company that’s going to continue to provide the same sort of upside over the long term.
Hydro One
A company I cover less frequently, but another utility name that could see significant upside in this declining rate environment, is Hydro One (TSX: H). This Ontario-based electricity transmission and distribution utility stock holds approximately $33 billion in assets and caters to 1.5 million customers who allow the utility giant to bring in around $7.8 billion in revenue annually.
For investors, Hydro One represents a low-risk opportunity to invest in a major regulated electric utility. It ranks among North America’s largest electric utilities and has a significant presence in Canada’s most populous province. Additionally, the company boasts one of the strongest investment-grade balance sheets in the North American utility sector.
Shareholders of Hydro One benefit from an annual dividend yield of 3.1%. These dividends have grown by over 50% in the past eight years. Hydro One aims to keep a payout ratio between 70% and 80%, providing sufficient flexibility to reinvest in growth, reduce debt, and increase dividends.
Brookfield Renewable Corporation
Last but not least, we have Brookfield Renewable (TSX: BEPC), one of the largest publicly traded options for investors seeking exposure to renewable energy. The company’s portfolio features about 21,000 megawatts of capacity across nearly 6,000 facilities located in North America, South America, Europe, and Asia.
Specializing in hydroelectric power, which makes up around 62% of its portfolio, the company also has significant experience in owning, operating, and investing in wind, solar, distributed generation, and storage facilities globally.
Brookfield Renewable Partners aims to achieve long-term annualized total returns of 12-15%, with annual distribution growth of 5-9% driven by organic cash flow and project development. The company has a proven history of value creation through strategic acquisition, development, financing of assets, and active management of its operations.
Currently, the company’s dividend yield is 4.5%. The dividend increase streak is 13 years, and the five-year dividend-growth rate sits at 5.1%.
