Investors looking to earn stress-free passive income can rely on top Canadian dividend stocks. For decades, these companies have rewarded their shareholders with higher dividend payments, making them attractive investments that generate worry-free income.
With this backdrop, let’s explore three Canadian stocks with solid fundamentals and a growing earnings base that can help sustain their payouts for years. I’ll focus on the energy, utility, and banking sectors, which are famous for their impressive track records of dividend payments and growth.
Top energy stock: Enbridge
While several energy stocks are known for their stellar dividend payouts, Enbridge (TSX:ENB) stands out for its resilient business model, solid distribution history, attractive yield, and visibility over future earnings growth. These attributes make Enbridge a top choice for stress-free passive income.
The energy infrastructure giant has consistently paid dividends for more than 69 years. Moreover, it increased its dividend in the past 29 years at an average annual growth rate of 10%. Enbridge’s growing payouts show the company’s strong financial position and ability to grow earnings in all market conditions. Enbridge pays a quarterly dividend of $0.915, reflecting a high yield of 6.5%.
Enbridge is well positioned to continue generating solid earnings supported by its diversified revenue stream and low-risk capital projects. Its long-term contracts, extensive network of liquid pipelines, regulated cost-of-service tolling frameworks and power purchase agreements should all drive its earnings and distributable cash flow (DCF). In the long term, its earnings and DCF are forecasted to grow at a mid-single-digit rate, enabling the company to consistently hike its dividend.
Top utility stock: Fortis
Utility companies are known for their defensive business model, regulated operations, predictable cash flows, and solid dividend payments, making them reliable investments for income investors. Within the utility sector, Fortis (TSX:FTS) is a reliable stock to earn steady passive income for decades.
Fortis has consistently grown its dividends for 51 consecutive years. Moreover, it plans to raise its dividend by 4-6% annually through 2029. The payouts are supported by its regulated businesses, which generate predictable and growing cash flows. It generates nearly 99% of its earnings from its regulated utility businesses in Canada, the U.S., and the Caribbean. This adds stability to its financials and supports higher payouts. Currently, it offers a yield of 4.1%.
The company is investing to expand its rate base, which should increase its earnings and dividend payouts. The company targets growing its rate base by 6.5% annually through 2029, positioning it well to increase its distributions in the future. Further, its investments in green energy augur well for growth and should cushion its earnings.
Top banking stock: BMO
The leading Canadian bank stocks are popular for paying dividends for more than 100 years. Bank of Montreal (TSX:BMO) is a compelling investment that’s consistently paid dividends for 195 years, the longest by any Canadian corporation. Moreover, Bank of Montreal’s dividend has grown by about 5% annually over the last 15 years. It also offers a decent yield of about 4.9%.
Bank of Montreal’s diversified revenue sources, including the high-growth wealth management business, growing deposit base, and operational efficiency, position it well to deliver solid earnings. Furthermore, its solid balance sheet and stable credit performance bode well for growth.
Bank of Montreal’s earnings are forecasted to grow at a high single-digit rate over the medium term. This should help drive its dividend payouts in the coming years.
