Retirees should buy dividend stocks amid falling interest rates to earn a stable passive income. Given their lower risk appetite, retirees should look for stocks with stable cash flows, consistent dividend payments, and healthy yields. Meanwhile, here are my three top picks.
Fortis
Fortis (TSX:FTS) operates 10 electric and natural gas utility assets across Canada, the United States, and the Caribbean. With around 99% of its assets regulated, its financials are less susceptible to market volatility. Amid these stable financials, the utility company has returned around 690% in the last 20 years at a CAGR (compound annual growth rate) of 10.9%. The company has also rewarded its shareholders by raising its dividend for 51 years; its forward yield currently stands at 4.08%.
Moreover, Fortis continues to expand its asset base and expects to invest $4.8 billion this year. Also, the company has planned to invest around $26 billion from 2025 to 2029. These investments could expand its rate base at an annualized rate of 6.5% to $53 billion by the end of 2029. These growth initiatives could boost the company’s financials, thus allowing it to continue raising its dividends. Meanwhile, the company’s management is confident of increasing its dividends by 4-6% annually until 2029. Considering all these factors, I believe Fortis would be an ideal buy for retirees.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) operates large, low-risk, high-value reserves. Given its balanced energy asset base, effective and efficient operations, and lower capital reinvestment requirement, the company enjoys lower breakeven oil prices than its peers. So, it enjoys healthy cash flows, which have allowed it to raise its dividends for 25 previous years at an annualized rate of 21%. With a quarterly dividend of $0.5625/share, CNQ currently offers a healthy forward dividend yield of 4.38%.
Moreover, CNQ plans to make a capital investment of $5.4 billion this year, strengthening its oil and natural gas production capabilities. For this year, the company’s management expects its total production to be between 1,330 and 1,380 MBOE/d (thousand barrels of oil equivalent per day), with the midpoint of the guidance representing a 1.8% increase from the previous year. Increased production could boost its financials. With the company’s net debt falling below its target of $10 billion, it could return 100% of its free cash flows to its shareholders this year. So, I believe CNQ’s future dividend payouts will be safer.
Enbridge
My final pick is Enbridge (TSX:ENB), which has been paying dividends uninterruptedly for 69 years. Supported by its regulated businesses and long-term contracts, its cash flows have been predictable and stable, allowing it to raise its dividends at a 10% CAGR for the previous 29 years. Also, its forward dividend yield stands at a juicy 6.51%.
Meanwhile, Enbridge recently acquired Public Service Company from Dominion Energy, thus completing the acquisition of previously announced three natural gas utility assets in the United States. These acquisitions could further strengthen Enbridge’s cash flows while lowering its business risks. The company also continues to invest $6-$7 billion annually, thus expanding its asset base. These growth initiatives could boost its financials, allowing it to maintain its dividend growth.
