Investors seeking stress-free passive income can put their savings into high-quality Canadian dividend stocks. These companies have strong fundamentals, robust cash flows, and a growing earnings base to support their payouts for decades. Moreover, investors can rely on their payouts even amid market volatility.
Against this backdrop, here are three Canadian stocks that can help generate stress-free passive income in all market conditions.
Enbridge
Canadian energy companies are renowned for consistently paying and raising dividends, and Enbridge (TSX:ENB) stands out as one of the top picks. This oil and gas transportation company has a relatively resilient business model. Further, it generates solid earnings and distributable cash flows (DCF), enabling it to distribute higher dividends to its shareholders in all commodity and market cycles.
The company has paid dividends for 69 years. Moreover, it raised its quarterly payouts at a compound annualized growth rate (CAGR) of 10% for 29 consecutive years. Further, Enbridge stock offers a well-protected yield of about 6.7%. In addition, the target payout ratio of 60 to 70% of DCF is sustainable in the long term.
Enbridge is well-positioned to benefit from its highly diversified revenue streams and high asset utilization rate, which will drive its earnings and DCF per share. Further, high-quality infrastructure assets, long-term contracts, and power-purchase agreements will support its financials. Additionally, its investments in conventional and renewable energy assets, strategic acquisitions, and multi-billion secured projects will likely expand its earnings base and drive higher dividend payments.
Enbridge anticipates DCF increasing by 3% in the near term and 5% in the medium term. This will enable the company to grow its annual dividend at a similar pace in future years.
Bank of Montreal
Like energy companies, investors can also rely on leading Canadian banks, which have been consistently paying dividends for decades. Bank of Montreal (TSX:BMO) is one of them, sporting the longest history of dividend payments in Canada.
This financial services giant has paid dividends for over 195 years and has increased its dividend at a CAGR of 5% in the last 15 years. This makes it a top pick for investors seeking stress-free passive income. The bank also offers a lucrative yield of 5.6%.
Bank of Montreal’s diversified revenue streams support its growing earnings base, enabling it to offer higher payouts. Further, its solid balance sheet, stable credit performance, and operational efficiency will likely drive its future earnings, supporting higher dividend payments.
Over the medium term, the bank expects its earnings per share (EPS) to grow at a CAGR of 7-10%. This means Bank of Montreal is well-positioned to increase its dividend by at least a mid-single-digit rate.
Canadian Utilities
Canada’s leading utility companies are known for their durable dividend payments, and one such solid stock is Canadian Utilities (TSX:CU). This utility giant has the longest track record of growing its annual dividends among all Canadian companies.
Canadian Utilities boasts an unmatched and uninterrupted 52-year dividend-growth history. Its payouts are supported by its defensive business model, growing rate base, robust earnings, and predictable cash flows. Moreover, the company generates most of its earnings from regulated utility assets, implying its payouts are well-covered. Besides higher dividends, it offers an attractive yield of about 5.2%, near the current price levels.
Canadian Utilities is well-positioned to enhance its shareholders’ value through higher dividend payments as it continues to invest in regulated utility assets. This will likely expand its rate base and drive future earnings. Moreover, the company’s focus on optimizing its energy infrastructure capital projects will likely support its profits and dividends.
