3 Great Canadian Dividend Stocks to Build Retirement Wealth

Top dividend-paying companies on TSX provide steady passive income and have the potential to deliver steady capital gains in the long term.

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Dividend stocks are attractive and relatively safe investment options for investors seeking to build wealth for retirement. Notably, some of the well-established dividend-paying companies trading on the TSX provide steady passive income and also have the potential to deliver steady capital gains in the long term. This ensures income stability and growth for retirees.

Besides their fundamentally strong businesses and reliable payouts, some dividend stocks have high yields, which can act as an effective hedge against inflation. These attributes make them great dividend stocks for building retirement wealth.

Against this background, let’s look at three great Canadian stocks with a solid dividend payment and growth history.  

Canadian Natural Resources

Speaking of great Canadian dividend stocks, investors could consider Canadian Natural Resources (TSX:CNQ). This crude oil and natural gas production company is renowned for uninterruptedly paying dividends for over two decades and increasing them at a stellar pace. For example, Canadian Natural Resources has increased its dividend at an impressive compound annual growth rate (CAGR) of 21% for 24 years.

While investors benefitted from its consistent dividend payouts, CNQ’s solid fundamentals and impressive financials led to a rally in its shares. Canadian Natural Resources stock generated solid capital gains of over 279% in the last five years. Moreover, it currently offers a dependable yield of 4.2%.

The energy company is well-positioned to generate significant free cash flows backed by its efficient operations, ability to increase production, and disciplined capital-allocation strategy, which will support higher dividend payouts. Further, the company’s long-life assets, high-value reserves, low maintenance capital requirement, and solid balance sheet position it well to grow earnings and payouts in all market conditions.

Fortis

Retirees can also rely on utility companies for their track record of paying worry-free dividends. Fortis (TSX:FTS), one of the top utility companies, can be a compelling investment for Canadians.

Thanks to its defensive business model, growing rate base, and ability to generate predictable cash flows, Fortis has enhanced its dividend payments for 50 years. Moreover, as Fortis generates most of its earnings through regulated assets, its payouts are reliable and well-covered. Furthermore, it offers an attractive yield of 4.4%.

The electric utility company remains committed to boosting its shareholders’ returns through higher dividend payments. It plans to expand its rate base at a CAGR of 6.3% through 2028, enabling it to grow its dividends at a 4-6% CAGR in the same period.

Fortis is focused on investing in regulated utility assets, which will likely expand its rate base, future earnings, and dividend payouts. The company’s resilient business model and growing rate base will continue to generate solid cash flows and, in turn, support higher dividend payments.

Bank of Montreal

Top Canadian banking stocks are also reliable bets for dependable income, as they have been famous for paying dividends for over a century. Bank of Montreal (TSX:BMO) is one of them, having the longest record of dividend payments in Canada. This makes it a solid stock for earning safe passive income and an excellent pick for your retirement portfolio.

It is worth noting that the Bank of Montreal has consistently paid dividends for over 195 years. Moreover, the financial services company increased its dividend at a CAGR of 5% in the past 15 years. Additionally, the bank offers a healthy yield of 5.3% at the current levels.

Over the medium term, the bank expects its earnings to increase at a 7-10% CAGR, enabling it to boost its dividend by at least a mid-single-digit rate. The bank’s diversified revenue base, solid deposit base, growing loan portfolio, and improving operational efficiency will continue to boost its earnings, driving its future payouts.

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources and Fortis. The Motley Fool has a disclosure policy.

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