Dividend stocks offer investors a low-cost way to begin a passive-income stream. In addition to a steady stream of recurring income, quality dividend stocks should also help create investor wealth via long-term capital gains. However, as dividend payouts are not guaranteed, it is crucial to identify a portfolio of fundamentally strong companies that can generate stable cash flows across market cycles.
Ideally, these cash flows should expand each year, resulting in consistent dividend hikes and raising the effective yield significantly over time. Here are two such Canadian dividend stocks that could create $1,000 in passive income this year.
Whitecap Resources stock
Valued at $6.2 billion by market cap, Whitecap Resources (TSX:WCP) pays shareholders an annual dividend of $0.73, translating to a forward yield of 7.1%. Whitecap is an oil and gas company, and its operational momentum continued in the second quarter (Q2) after an “active first-quarter drilling program and the start-up of its Musreau facility,” which produced record quarterly volumes of 177,314 barrels of oil equivalent per day.
Its strong production results across its Montney and Duvernay assets contributed to higher production, which was higher than its internal forecast of 170,500 boe/d in Q2 of 2024.
Due to higher oil prices, Whitecap’s funds flow stood at $426 million or $0.71 per share. The company spent $204 in capital expenditures, which indicates its free funds flow stood at $223 million in the June quarter. Comparatively, it paid $109.2 million in dividends, indicating a payout ratio of less than 50%.
Whitecap has enough room to lower balance sheet debt and target growth via acquisitions and organic expansion. It ended the quarter with a net debt of $1.3 billion, indicating a debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) of 0.6 times.
Whitecap improved its balance sheet as it sold non-core assets for $520 million in gross proceeds, a portion of which was used to lower long-term debt.
Enbridge stock
Enbridge (TSX:ENB) is a dividend giant that offers shareholders an annual dividend of $3.66 per share, indicating a forward yield of 6.9%. The Canada-based energy infrastructure heavyweight revised its financial outlook to include contributions from the acquisitions of three U.S. gas utilities that will be completed by the end of 2024.
Enbridge forecast adjusted EBITDA at $18.3 billion, up from its earlier forecast of $17.7 billion. It also forecast distributable cash flow per share between $5.40 and $5.80, indicating a payout ratio of 65%.
Enbridge’s cash flows are tied to inflation-linked long-term contracts, allowing the company to maintain its dividends amid volatile commodity prices. In fact, it has raised dividends by 10% annually on average in the last 29 years, which is exceptional for an energy company.
Priced at 18.8 times forward earnings, ENB stock trades at a reasonable valuation, given it continues to reinvest in organic growth, which should drive future cash flows and dividends higher.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Enbridge | $53.35 | 135 | $0.915 | $124 | Quarterly |
| Whitecap Resources | $10.27 | 701 | $0.061 | $42.82 | Monthly |
To earn $1,000 in annual dividends, investors may consider allocating $14,400 distributed equally in the two stocks. It’s beneficial to add other quality dividend stocks to your portfolio and benefit from diversification.
