Investing in quality dividend stocks is one of the easiest and most convenient ways to safeguard your retirement. Given their solid underlying businesses, stable cash flows, and consistent payouts, these companies are less susceptible to market volatility, making them ideal for risk-averse retirees. Against this backdrop, here are my three top picks.
Fortis
Fortis (TSX:FTS) is an electric and natural gas utility company, with 93% of its assets in the low-risk transmission and distribution business. Supported by its highly regulated, low-risk business, the company has delivered an average total shareholder return of 10.1% for the previous 20 years, outperforming the broader equity markets. Also, the company is a “Dividend King,” which has been raising its dividends for the last 50 years. It currently offers a healthy dividend yield of 4.4%.
Further, Fortis plans to invest around $25 billion from 2024-28, with around $7 billion in clean energy. The company plans to fund 66% of these investments with cash generated from its operations and secondary equity offerings, while the remaining 34% will come from debt. So, these investments won’t substantially increase its debt.
These investments could grow Fortis’s rate base at an annualized rate of 6.3% to $49.4 billion by 2028. Along with rate base expansion, tariff hikes and improving operational efficiency could boost its financials in the coming years. Amid these growth initiatives, Fortis hopes to raise its dividends by 4 to 6% annually through 2028. So, I believe Fortis would be an excellent addition to your retirement portfolio.
Enbridge
Another top dividend stock to have in your portfolio would be Enbridge (TSX:ENB). The midstream energy company earns around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from long-term contracts. Besides, around 80% of its EBITDA is inflation-indexed, thus lowering the impact of rising commodity prices. So, the company’s cash flows are stable and predictable, allowing it to raise its dividends for the last 29 years. It currently pays a quarterly dividend of $0.915/share, with its forward yield at 7.6%.
Further, Enbridge is expanding its asset base through organic growth and strategic acquisitions. Its $25 billion secured capital program and the acquisition of three natural gas assets in the United States could boost its financials in the coming years. Besides, its financial position also looks healthy, with its debt-to-EBITDA ratio at 4.7, within the company’s guidance of 4.5 and 5. Considering all these factors, I believe Enbridge would be an ideal buy.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is an oil and natural gas production company with a diversified and balanced asset portfolio. Its low-risk, high-value reserves, efficient operations, and diversified cash flows provide stability to its financials, thus allowing it to raise its dividends consistently. The Calgary-based energy company has increased its dividends at a CAGR (compound annual growth rate) of 21% for the last 24 years. With a quarterly dividend of $0.525/share, the company offers a forward yield of 4.3%.
Meanwhile, CNQ has plans to drill 298 conventional exploration and production wells this year, with around 65% of these wells scheduled for the second half of this year. Besides, the company has planned to invest around $5.4 billion this year, strengthening its asset base. Given these growth initiatives, I expect its production to rise in the coming quarters. Meanwhile, the management expects its total production per share to grow by 3 to 7% this year.
Looking forward, analysts expect oil prices to remain higher amid rising demand in the summer and continued voluntary production cuts by OPEC (Organization of the Petroleum Exporting Countries) and its allies. So, I believe CNQ’s future dividend payouts to be safe, thus making it an ideal buy for retirees.
