Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These powerful energy stocks should give Canadians a future filled with income through both dividends and returns. Let’s look at why.

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The world is on an exciting journey toward a cleaner, greener future, and Canada is riding the wave with gusto. The transition to renewable energy isn’t just a trend. It’s a revolution reshaping how we power our lives. And, of course, an investment opportunity.

Canada, with its vast landscapes and abundant natural resources, is perfectly poised for a renewable energy renaissance. In recent years, the country has significantly ramped up its investments in renewable energy sources, including hydro, wind, solar, and biomass. Hydropower leads the charge, contributing about 60% of Canada’s electricity supply. This makes Canada the second-largest producer of hydroelectricity in the world, right after China.

Canada has set a goal to achieve net-zero emissions by 2050, with significant milestones along the way, such as phasing out coal-fired power by 2030. Global offshore wind capacity reached about 29 gigawatts in 2020. This figure should quadruple by 2030.  So let’s look at how investors can get in on the action.

Brookfield Renewable

Brookfield Renewable Partners LP (TSX:BEP.UN) has consistently proven itself to be a top dividend stock in the energy sector, and it’s easy to see why. This renewable energy powerhouse boasts a diversified portfolio of over 19,000 megawatts of installed capacity, spanning hydroelectric, wind, solar, and storage facilities across North America, South America, Europe, and Asia. 

Historically, BEP has shown remarkable growth. Over the past decade, the company’s funds from operations (FFO) have grown at a compound annual growth rate (CAGR) of approximately 10%. This impressive growth has been driven by both organic developments and strategic acquisitions. The company’s commitment to maintaining and growing its dividend is evident. BEP.UN has increased its distribution every year for the past decade, with a target annual growth rate of 5 to 9%. 

Currently, the dividend yield hovers around 5.6%, making it a lucrative option for income-focused investors. BEP is well-positioned for continued growth with a robust pipeline of projects and a strong focus on sustainability. Analysts are optimistic, projecting that the shift towards renewable energy will further bolster Brookfield Renewable’s earnings and dividend growth in the years to come.

Hydro One

Hydro One (TSX:H) is another gem in the energy sector, particularly known for its stable and reliable dividends. As Ontario’s largest electricity transmission and distribution provider, Hydro One serves nearly 1.4 million customers. The company’s business model is heavily regulated. This provides a predictable revenue stream and reduces risk for investors. 

Over the past few years, Hydro One has maintained a solid track record of earnings growth, with a CAGR of about 6% since its initial public offering (IPO) in 2015. This stability translates directly into its dividend policy. Hydro One has consistently increased its dividend, offering a current yield of around 3.2%. The company’s payout ratio at 65% remains comfortably within industry standards, ensuring that dividends are sustainable. 

Looking ahead, Hydro One’s investments in infrastructure upgrades and grid modernization should drive future earnings growth. This focus on enhancing operational efficiency and reliability will likely support continued dividend increases, making Hydro One a dependable choice for dividend investors.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN) is a standout in the renewable energy and utilities space, known for its impressive dividend history and growth prospects. AQN operates through two primary segments: regulated utilities and renewable energy. This dual focus provides a balanced revenue stream and reduces overall risk. Historically, AQN has delivered robust financial performance, with a CAGR of about 8% in earnings over the past five years.

One of the key attractions of AQN is its commitment to shareholder returns. The company currently offers a dividend yield of approximately 7.3% and has a strong history of annual dividend increases, aiming for 10% growth per year. 

Algonquin’s ambitious growth strategy includes significant investments in both renewable energy projects and utility infrastructure. These investments should drive future earnings and support continued dividend growth. AQN has a solid financial foundation and a clear focus on sustainable energy. Therefore, it is well-positioned to remain a top dividend stock in the energy sector.

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 Amy Legate-Wolfe has positions in Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

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