Investing in dividend stocks can help to earn regular passive income. Moreover, reinvesting dividends enhances overall returns in the long term. However, not all dividend-paying stocks are worth investing in, as the payouts are not guaranteed. Therefore, investors should consider high-quality Canadian stocks with the potential to pay and increase their dividends for years.
With that in mind, let’s look at three safe Canadian dividend-paying companies committed to enhancing shareholder value regardless of market conditions. These fundamentally strong companies have solid business models, growing earnings bases, robust cash flows, and well-covered payouts, making them relatively safe dividend stocks.
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Stock #1
Canadian energy companies are known for offering solid dividends. Among the leading energy stocks, Enbridge (TSX: ENB) has been a dependable bet for uninterrupted dividend payments for over 69 years. Moreover, this energy company has raised its dividend for 29 years at a compound annual growth rate (CAGR) of 10%. Besides solid dividends, Enbridge offers an attractive yield of about 7.5% near the current market price.
The company’s stellar payouts reflect its resilient business model, diversified revenue streams, growing earnings base, and ability to generate solid distributable cash flows (DCFs). Enbridge’s long-term contracts, power-purchase agreements, high asset utilization rate, and multi-billion-dollar secured capital projects drive its DCF per share and payouts in all market conditions. Further, the energy infrastructure company remains well-positioned to capitalize on growing energy demand through its investments in conventional and renewable energy sources.
Over the long term, Enbridge’s management projects its earnings and DCF per share to increase at a mid-single-digit rate. This could lead to low-to-mid-single-digit growth in its dividend in the upcoming years. Enbridge’s solid payout history, resilient earnings base, and visibility over its future payments make it a compelling passive income stock.
Stock #2
Utility companies are also famous for offering dependable dividends. Their payouts are supported by their defensive business model and ability to generate predictable cash flows. Within the Canadian utility sector, Fortis (TSX: FTS) is a good bet considering its stellar dividend payment and growth history. It has increased its dividends for 50 years and plans to increase them further at a CAGR of 4 to 6% through 2028.
This electric utility company offers a well-protected yield of 4.5%. Its resilient business model and growing rate base will help it generate solid cash flows and support higher dividends. Further, as Fortis generates most of its earnings through regulated assets, its payouts are well-covered and reliable.
Fortis continues investing in regulated utility assets, which will likely expand its rate base and future earnings. It plans to expand its rate base at a CAGR of 6.3% through 2028, enabling FTS stock to grow its dividend at a mid-single-digit rate. Fortis’ resilient payouts and growing dividends reflect its management’s commitment to enhancing shareholders’ returns.
Stock #3
Investors can add shares of leading Canadian banks to earn safe dividend income as they have been paying dividends for over a century. Among the top TSX banks, Toronto-Dominion Bank (TSX: TD) has consistently paid dividends for 167 years, making it a safe and reliable stock for income-seeking investors.
Besides regular dividend payments, this financial services giant has raised its dividend at a CAGR of about 10% since 1998. Notably, Toronto-Dominion Bank’s dividend has grown much faster than that of its peers. The financial services giant has a low payout ratio of 40 to 50%, implying its dividend distributions are sustainable over the long term. Moreover, the bank offers a healthy yield of 5.4% at the current levels.
The bank’s solid dividend payment and growth history reflect its ability to expand earnings in all market conditions. In the future, Toronto-Dominion Bank’s high-quality assets, diversified revenue streams, and focus on improving efficiency will continue to drive its earnings and support higher dividend distributions. Further, the bank’s focus on its growing loan portfolio, solid deposit base, strong credit quality, and strategic acquisitions augur well for long-term growth.
