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.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published June 27, 2024 4:10 pm EDT

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.

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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.