Investors looking to earn a stable passive income should consider buying quality dividend stocks. Although several companies offer healthy dividends, investors should look to invest in stocks with solid underlying businesses, healthy growth prospects, and higher dividend yield. Against this backdrop, I have chosen the following three top picks, which offer over 6% dividend yields.
TC Energy
TC Energy (TSX:ENB) is an energy infrastructure company transporting oil and natural gas across North America through a pipeline network. It also operates seven power generation facilities, with a total production capacity of 4.6 gigawatts. Supported by its contracted asset base, the company generates stable cash flows, allowing it to raise dividends uninterruptedly since 2000 at an annualized rate of 7%. Its forward dividend yield stands at 6.7%.
The company continues to expand its asset base and has planned to put around $7 billion of assets into service this year. It further expects to invest around $6-$7 billion annually from next year onwards, thus boosting its financials. Besides, the company is working on divesting assets that could generate around $3 billion, strengthening its asset base. It is also hopeful of achieving its debt-to-EBITDA target of 4.8 by the end of this year. Given its solid underlying contracted business and continued investments, the company is well-positioned to continue with its dividend growth.
Further, TC Energy is working to spin off its Liquids Pipelines business to enhance its shareholders’ value. Its shareholders have approved the spin-off and are awaiting regulatory and court approvals.
Telus
The Canadian telecom sector is going through a tough period amid unfavourable regulatory policies and a higher interest rate environment. Amid the weakness, Telus (TSX:T), one of the three top players in Canada, has lost around 37% of its stock value compared to its 2022 highs. Despite the near-term weakness, I am bullish on Telus due to its long-term growth potential.
The digitization of business processes and expanding remote working and learning have increased the demand for telecommunication services. Meanwhile, the company continues to strengthen its infrastructure to expand its services. Its 5G service covers 86% of the Canadian population, while its PureFiber network connects 3.2 million premises. Also, the telco’s churn rate has been on the lower side amid its consistent execution and bundled offerings. It earns substantial revenue from recurring sources, thus enjoying healthy cash flows and consistently raising its dividends.
Since 2011, Telus has raised its dividends 26 times. Besides, the company hopes to increase its dividends by 7-10% annually through 2025. Further, the Bank of Canada cut its benchmark interest rates by 0.25% to 4.5% earlier this week. Investors are optimistic about one more cut this year. Falling interest rates could provide some relief for the company.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN) is my third pick. Due to its defensive healthcare portfolio, long-term lease agreements and quality tenant base, the company enjoys a healthy occupancy and collection rate. Its lease agreements are inflation-indexed, thus protecting its financials against rising prices.
Moreover, the company divested its non-core assets, generating $566.5 million, which it used to pay off higher interest-bearing debts. Further, the company focuses on developing next-gen properties that could deliver long-term earnings growth. Besides, falling interest rates could also boost the company’s financials by lowering interest expenses. So, I believe NorthWest Healthcare is well-positioned to continue rewarding its shareholders with healthy monthly dividends. The REIT currently offers an attractive forward dividend yield of 7% and trades at a price-to-book multiple of 0.7, making it an excellent buy.
