Dividend stocks are excellent wealth-creators for investors. Historically, these companies have outperformed non-dividend-paying stocks. Due to their regular payouts, these companies are less susceptible to market volatility, thus stabilizing your portfolios. Also, investors can reinvest these payouts to earn superior returns. Against this backdrop, let’s look at two top dividend stocks that are ideal for your retirement portfolio.
Enbridge
My first pick would be Enbridge (TSX:ENB), a diversified energy company that transports and distributes oil and natural gas across North America. It is also strengthening its position in the renewable energy space. The company generates around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from low-risk regulated assets and long-term contracts, thus shielding its cash flows from volatility. These healthy cash flows have allowed the company to pay dividends uninterruptedly for 69 years. Also, the company has been raising its dividends at a 10% CAGR (compound annual growth rate) for 29 consecutive years. It currently offers a quarterly dividend of $0.915/share, translating into a forward yield of 6.22% as of the November 7th closing price.
Moreover, Enbridge is continuing with its $24 secured capital program, strengthening its midstream, utility, and renewable assets. Also, it recently acquired Public Service Company in North Carolina from Dominion Energy, thus completing the previously announced acquisition of three natural gas assets in the United States. These acquisitions have strengthened its cash flows while lowering its business risks. Amid these growth initiatives, the company’s management expects its adjusted EBITDA to grow at 7-9% annually through 2026, while its adjusted EPS (earnings per share) could grow at 4-6%. Meanwhile, its DCF (discounted cash flows)/share could grow at a CAGR (compound annual growth rate) of 3%. Further, the management expects its adjusted EBITDA and DCF/share to grow at a 5% CAGR after 2026.
Meanwhile, the company’s net debt-to-EBITDA in the third quarter rose to 4.9 compared to 4.7 in the previous quarter. However, the company’s management expects the earning contribution from recent acquisitions to lower the ratio next year. Also, its financial position looks healthy, with liquidity of $17.1 billion as of September 30. Considering its stable cash flows and healthy growth prospects, I expect Enbridge to maintain its dividend growth, thus making it an ideal stock for your retirement portfolio.
Fortis
Fortis (TSX:FTS) operates 10 regulated electric and natural gas utility assets across the United States, Canada, and the Carrebian. With 99% of its assets regulated and 93% involved in low-risk transmission and distribution business, the company’s financials are predictable, irrespective of the market conditions. Supported by these healthy financials, the company has increased its dividends for 51 years. Also, its forward dividend yield stands at a healthy 4.05%. The company has outperformed the broader equity markets with an average annual total shareholder return of 10.6% for the last 20 years.
Further, Fortis’s management has raised its capital investment projection for this year from $4.8 billion to $5.2 billion, with around $3.6 billion invested in the first nine months. The company has also planned to invest $26 billion over the next five years, growing its rate base at an annualized rate of 6.5% to $53 billion. The expanding rate base could drive its financials in the coming years, thus allowing it to continue raising its dividends consistently. Meanwhile, the company’s management hopes to increase its dividends by 4-6% annually through 2029.
