Although the Canadian equity markets have been upbeat this year amid the recent post-election rally, there are concerns over a global economic slowdown and the impact of President-elect Donald Trump’s 10% universal tariffs. Given the uncertain outlook, investors can add the following three quality dividend stocks to strengthen their portfolios and earn a stable passive income.
Fortis
Fortis (TSX:FTS) is a quality dividend stock to have in your portfolio due to its low-risk, regulated asset base, stable cash flows, and consistent dividend growth. With 99% of its regulated assets and 93% involved in low-risk transmission and distribution business, the company generates stable financials, irrespective of the broader market conditions. Amid these stable performances, the company has returned above 660% at an annualized rate of 10.7% over the last 20 years. The company has also raised its dividend for 51 consecutive years, while its forward yield currently stands at 3.95%.
Moreover, Fortis is expanding its asset base with a five-year capital plan of $26 billion. These investments could grow its rate base at an annualized rate of 6.5% to $53 billion by 2029. Along with rate base expansion, favourable price revisions and improving operating efficiencies could boost its financials in the coming years.
Meanwhile, the Bank of Canada has cut its benchmark interest rates four times since June. Falling interest rates could benefit capital-intensive utility businesses. Considering all these factors, I believe Fortis would be an excellent buy now.
Enbridge
Enbridge (TSX:ENB) transports oil and natural gas across North America through pipeline networks. It also has a strong presence in utility and renewable energy space. It operates low-risk businesses, with around 98% of its cash flows coming from regulated cost-of-service or long-term, take-or-pay contracts. So, its cash flows are less susceptible to market volatility. Amid its healthy cash flows, the company has paid dividends for 69 years. It has also increased its dividends for 29 previous years at an annualized rate of 10%. With a quarterly dividend of $0.915/share, the company currently offers a forward dividend of 6.16%.
Moreover, Enbridge is expanding its midstream, renewable, and utility assets through a $27 billion secured capital program, with $5 billion already spent this year. Amid these investments, the company’s management projects its EBITDA (earnings before interest, tax, depreciation, and amortization) and EPS (earnings per share) to grow at 7-9% and 4-6% through 2026, respectively. Also, its DCF (discounted cash flows)/share could grow at a 3% CAGR (compound annual growth rate). Meanwhile, the management expects its EBITDA, EPS, and DCF/share to grow at an annualized rate of 5% from 2026 onwards. Considering all these factors, I believe Enbridge is well-positioned to continue its dividend growth, thus making it an excellent buy.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is another stock with consistent dividend payments. It has been paying dividends since 1833 and has also raised its dividend at an annualized rate of 5.75% for the previous 10 years. With a quarterly dividend of $1.06/share, its forward dividend yield stands at 5.58%.
Amid easing inflation, the central banks of the United States and Canada have adopted monetary easing initiatives and have cut their benchmark interest rates. Falling interest rates could boost economic activities, thus driving credit demand. Meanwhile, Bank of Nova Scotia is witnessing deposit momentum and net interest margin expansion. Also, its improving operating leverage, steady credit performance, and solid balance sheet could support its financial growth in the coming quarters.
Moreover, the company has made strategic investments in KeyCorp, which could boost its near-term profitability and allow it to expand its footprint in the United States. Given its improving financials, consistent dividend payments, and healthy growth prospects, I believe BNS would be an ideal buy.
