Canadian equity markets have become volatile this month, with the S&P/TSX Composite Index falling 1.5%. Concerns over the delay in interest rate cuts by the United States Federal Reserve have made investors nervous, leading to a pullback. Given this uncertain outlook, investors should look to invest in high-yielding dividend stocks to collect a stable passive income while protecting their investments. Meanwhile, here are my three top picks.
BCE
Telecommunication companies are excellent defensive stocks due to the essential nature of their business in this digitally connected world. High initial investments and regulatory approvals have created a massive barrier for new entrants, thus allowing existing players to enjoy their market share. Further, the telcos enjoy stable cash flows due to their recurring revenue streams, thus allowing them to reward their shareholders with healthy dividends.
BCE (TSX:BCE), one of Canada’s top telecom players, is my first pick. The Montreal-based telco has raised dividends for 16 consecutive years. It currently pays a quarterly dividend of $0.9975/share, with an annualized payout of $3.99/share and a forward yield of 8.99%.
Amid the unfavourable regulatory policies, BCE has slashed its capital investments in pure fibre build and regulated businesses. However, it continues to expand its 5G and 5G+ services, which could continue to expand its customer base and drive growth. Further, the company has undertaken several initiatives to improve operating efficiency and cut expenses. So, despite the near-term volatility, I believe BCE would be an excellent buy at these levels.
Enbridge
Another high-yielding Canadian dividend stock that I am bullish on would be Enbridge (TSX:ENB). The midstream energy company transports oil and natural gas across North America through its pipeline network. It has signed long-term cost-of-service agreements with its clients, thus shielding its financials from commodity price fluctuations. So, its stable cash flows have allowed it to pay dividends for 69 years. Also, it has increased dividends at an annualized rate of 10% for the previous 29 years, with its forward yield currently at a juicy 7.58%.
Meanwhile, Enbridge has expanded its low-risk natural gas utility business by acquiring two facilities in the United States. It is working on acquiring the third asset, which the company expects to complete this year. These acquisitions could make Enbridge North America’s largest natural gas utility company. Besides, the company expects to invest around $6-$7 billion annually for three years, expanding its midstream, utility, and renewable assets. These growth initiatives could boost Enbridge’s financials and cash flows, thus making its future dividend payout safer.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX:PZA) operates 672 Pizza Pizza and 102 Pizza 73 brand restaurants through its franchisees. It collects royalty from its franchisees based on their sales. So, its financials are less susceptible to rising commodity prices and wage inflation. Meanwhile, the increase in menu prices to accommodate higher expenses will boost its royalty pool income.
The company’s value-oriented menu offerings and technology innovations continue to resonate with its customers, as its same-store sales remained positive for the 12th consecutive quarter. Further, the company continues expanding its footprint and hopes to increase its traditional restaurant store count by 3-4% this year. Healthy same-store sales and restaurant expansions could increase its royalty income, thus making its future dividend payouts safer. PZA currently pays a monthly dividend of $0.0775/share, translating into an annualized payout of $0.93/share and a forward yield of 7.05%.
