Dividend stocks are a source of recurring income. While many companies offer dividends, it’s important to note that these payouts are not guaranteed. Only a few companies with solid fundamentals and a growing earnings base can sustain paying dividends for life. Against this background, here are my top three Canadian stocks with sustainable payouts. Investing in these unstoppable dividend stocks provides steady income for life.
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Bank of Montreal
The large Canadian banks are known for their stellar dividend distribution history spanning more than a century. This makes them a top option for earning lifelong dividends. Among the leading banks, Bank of Montreal (TSX: BMO) stands out for its longest-running payout record. The financial services giant has been regularly paying dividends for 195 years. Moreover, it has increased its dividend by an average annualized growth rate of 5% over the past 15 years.
Bank of Montreal’s ability to attract new customers and grow its market share supports its payouts. Moreover, the bank’s diversified revenue sources and growing footprint in strong regional economies position it well to grow its earnings and dividend payments. Bank of Montreal also benefits from its strategic acquisitions, which increase its scale and strengthen its position in new markets to target growth opportunities.
The Canadian bank expects its earnings to increase by 7-10% in the medium term, enabling it to grow its dividend in the upcoming years. Its strong balance sheet and operating efficiency will cushion its earnings and support future payouts.
Fortis
Canadian utility giant Fortis (TSX: FTS) has been a reliable stock to earn steady passive income for decades. The company has been consistently increasing its dividend for 50 consecutive years. Moreover, it aims to grow its dividend by 4-6% annually through 2028.
Fortis’s payouts are secured by its regulated businesses, which generate predictable and growing cash flows. It operates 10 regulated utility businesses in Canada, the U.S., and the Caribbean and generates nearly 99% of its earnings from these assets. This adds stability to its financials and supports higher payouts.
Fortis is investing to expand its rate base, which will grow its earnings and dividend payouts. The company targets growing its rate base by 6.3% annually through 2028, positioning it well to grow its distributions in the future. Further, its investments in green energy augur well for growth and will cushion its earnings.
TC Energy
Energy infrastructure company TC Energy (TSX: TRP) is among the leading Canadian companies known to reward its shareholders with consistent payouts and dividend growth. Its diversified revenue streams and utility-like assets generate steady and predictable cash flows, supporting its payouts.
Thanks to its high-quality assets, TC Energy has raised its dividend by about 7% per year for the last 24 consecutive years. It is on track to increase its dividend further in the upcoming years.
The energy infrastructure company earns most of its earnings (about 95%) from rate-regulated assets and long-term contracts. This helps TC Energy to generate low-risk earnings and grow its payouts. Moreover, TC Energy also benefits from higher system utilization.
The company’s long-life infrastructure assets, commercial arrangements, $31 billion secured projects, and regulated business model will generate significant earnings in the coming years and will support its higher payouts. TC Energy expects to increase its dividend by 3-5% per annum in the long term and offers a high yield of about 6%.
