Dividend stocks have historically outperformed the broader equity markets. Besides, their regular payouts make these stocks less susceptible to market volatility. Although the Canadian equity markets are trading at record highs, uncertainties over the global slowdown and geopolitical tensions persist. Amid this uncertain outlook, investors can strengthen their portfolios by adding the following three quality dividend stocks.
Enbridge
Enbridge (TSX:ENB) is an energy infrastructure company operating highly regulated businesses, with around 98% of its cash flows generated from regulated cost-of-service and take-or-pay contracts. Around 80% of its EBITDA (earnings before interest, tax, depreciation, and amortization) is inflation-indexed, thus protecting its financials against rising prices. So, the company’s cash flows are predictable and stable, allowing it to raise its dividends consistently for 29 years at an annualized rate of over 10%. Meanwhile, it currently pays a quarterly dividend of $0.915/share, with its forward yield at 6.6%.
Meanwhile, the midstream energy company is expanding its asset base through its $24 billion secured capital program. Besides, it has acquired two natural gas utility facilities in the United States from Dominion Energy and is working on acquiring the third facility. These acquisitions could further lower its business risks and strengthen its cash flows, thus making its future dividend payouts safer. Moreover, the company’s financial position looks healthy, with its debt-to-EBITDA multiple standing at 4.7, within the company’s guidance. Management is also hopeful of lowering it further next year. Considering all these factors, I am bullish on Enbridge.
Telus
Second on my list would be Telus (TSX:T), which has been witnessing healthy buying over the last few weeks. The company’s stock price has increased by 6.8% compared to the previous month’s lows. The falling interest rates have raised investors’ interest in the capital-intensive telecom sector, thus driving the stock price of Telus higher. Despite the recent increase, the company trades around a 34% discount compared to its 2022 highs. Also, its valuation looks attractive, with its NTM (next 12 months) price-to-sales multiple at 1.7.
Meanwhile, telecom companies earn substantial revenue from recurring revenue streams, thus enjoying healthy cash flows. Supported by these solid cash flows, the company has raised its dividends 26 times since May 2011. Meanwhile, it currently pays a quarterly dividend of $0.3891/share, translating to a forward yield of 6.8%. Moreover, Telus is expanding its 5G and broadband infrastructure, which could help expand its customer base and raise average revenue per user in this digitally connected world. Considering its high yield, discounted stock price, and healthy growth prospects, I believe Telus would be an excellent buy for income-seeking investors.
Canadian Utilities
My final pick would be Canadian Utilities (TSX:CU), which has been raising dividends for 52 years – the longest track record of annualized dividend growth by any Canadian public company. Its low-risk electricity and natural gas transmission and distribution business provides more visibility on its cash flows, thus allowing it to raise its dividends consistently. It currently pays a quarterly dividend of $0.4531/share, with its forward yield at 5%.
Meanwhile, the utility firm plans to make a capital investment of $4.3-$4.7 billion from 2024 to 2026, growing its rate base at an annualized rate of 3.5%-4.3%. Along with these investments, the company is investing around $2.4-$2.6 billion in renewable energy, with a total production capacity of 1.3 gigawatts. These growth initiatives could boost its cash flows, thus allowing it to continue its dividend growth.
