Dividend stocks are a top investment choice for investors seeking recurring passive income. However, as dividend payments are not guaranteed, investors should look for companies with fundamentally solid businesses and the ability to pay and increase their dividends regardless of market conditions.
Thankfully, several Canadian stocks have a proven history of dividend payments and growth. Moreover, these companies have resilient earnings bases and solid cash flows, enabling them to offer well-covered payouts. Further, their management is committed to enhancing shareholders’ value through higher dividend payments, making them relatively safe dividend stocks to buy now.
In light of this, let’s look at three safe Canadian dividend stocks that could offer worry-free dividend income.
Enbridge
Enbridge (TSX:ENB) is a relatively safe stock for earning durable dividend income. The energy infrastructure giant is known for rewarding its shareholders, reflected through its stellar track record of higher payouts. Thanks to its resilient earnings base and robust distributable cash flow (DCF), the company has uninterruptedly increased its dividend for 29 years at a compound annual growth rate (CAGR) of 10%.
Enbridge’s diversified revenue streams lower commodity and price risk, thus adding stability to its earnings. Further, long-term contracts and power-purchase agreements support its growth in all market conditions.
Notably, the company consistently invests in growing its conventional and renewable energy assets, positioning it well to deliver steady growth and capitalize on energy demand. Furthermore, its multi-billion capital projects and strategic acquisitions augur well for future earnings and DCF.
Enbridge’s earnings and DCF per share are projected to grow at a mid-single-digit rate in the long term. This indicates that the company’s dividend could grow in line with its earnings per share and DCF growth rate.
In summary, Enbridge is a reliable dividend stock. Moreover, it offers a high yield of 6.9%, near the current market price. Also, its dividend payout ratio of 60-70% of DCF is well-covered and sustainable in the long term.
Fortis
Fortis (TSX:FTS) is another safe bet for investors seeking regular dividend income. The durability of its distributions and visibility over future payouts make Fortis a compelling passive-income stock. This Canadian utility giant has raised dividends for 50 consecutive years. Further, the company projects its dividends to grow by 4-6% annually through 2028. Besides stellar dividends, Fortis stock offers a worry-free yield of over 4%.
The company’s low-risk and rate-regulated business generates predictable and growing cash flows that support higher dividend payments. Further, as Fortis generates nearly all of its earnings via regulated utility assets, its payouts are relatively safe and sustainable in the long term.
The company’s strategic focus on growing its rate base through ongoing investments in regulated utility assets will likely drive its future earnings and payouts. The company expects its rate base to increase by approximately 6.3% annually through 2028. This will lead to steady earnings growth, enabling Fortis to deliver higher dividend payments.
Bank of Montreal
Investors can add shares of leading Canadian banks to earn safe dividend income as they have been paying dividends for decades. Among the top TSX banks, Bank of Montreal (TSX:BMO) could be a valuable addition to your portfolio for worry-free passive income.
This financial services company paid dividends for over 195 years, the longest track record of uninterrupted dividend payments. Moreover, Bank of Montreal has increased its dividend at a CAGR of 5% in the past 15 years. Over the medium term, Bank of Montreal expects its earnings to increase at a CAGR of 7-10%, enabling it to grow its dividend at least at a mid-single-digit rate during the same period.
The bank’s diversified revenue base, expansion of its loan portfolio, solid deposit base, and operational efficiency will enable it to grow its earnings and dividend payments. Bank of Montreal stock offers a juicy dividend yield of over 5.5%.
