Investing in fundamentally strong dividend stocks is a low-cost strategy to create a passive stream of recurring income. In addition to a regular dividend payout, you can benefit from long-term capital gains by investing in top dividend stocks.
While several dividend stocks are trading on the TSX, just a handful of these companies are positioned to deliver market-beating returns to shareholders over time. In this article, I have identified two quality TSX dividend stocks you can buy with $500 right now.
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South Bow stock
South Bow (TSX: SOBO), valued at a market cap of $7.4 billion, was recently spun off from TC Energy. The company’s oil and liquids pipeline infrastructure spans 4,900 kilometres and connects crude oil supplies in Canada to refining markets in the United States. Its Keystone Pipeline System is South Bow’s largest liquids pipeline asset, safely transporting crude oil to meet energy demand in North America.
South Bow pays shareholders an annual dividend of $2.75 per share, which translates to a forward yield of 7.7%. Around 88% of the company’s EBITDA (earnings before interest, tax, depreciation, and amortization) is contracted, while 96% of its revenue exposure is to investment-grade counterparties.
South Bow connects the strongest demand and supply markets in North America, making it a top investment option in November 2024.
In 2025, South Bow expects comparable EBITDA to range between US$1.4 billion and US$1.5 billion. Moreover, the company is on track to invest US$500 million in discretionary growth projects over the next four years, which should drive future cash flows and earnings higher.
Brookfield Renewable Partners stock
Valued at a market cap of $12.2 billion, Brookfield Renewable Partners (TSX: BEP.UN) currently offers shareholders a forward dividend yield of 5.4%. Brookfield Renewable is among the largest clean energy companies and is part of an expanding addressable market.
The clean energy giant underwrites its investments on a hold-to-maturity basis, aiming to deliver annual returns of between 12% and 15%. Moreover, it often enhances these returns by monetizing mature assets, which also helps to fund other business expansion projects.
In the first nine months of 2024, Brookfield executed transactions generating US$2.3 billion of proceeds, resulting in returns of 2.5 times its invested capital.
In its shareholder letter, Brookfield Renewable stated, “Based on the other ongoing sales processes we have in the market, the continued strong underlying fundamentals, and the large number of assets that we believe will be ready for sale in the coming quarters, we expect we will be able to deliver more successful monetizations over the next twelve months at strong returns, further helping to fund our growth.”
Brookfield Renewable generated FFO (funds from operations) of US$278 million, or US$0.42 per unit, an increase of 11% year over year. Brookfield’s wind and solar business generated a combined FFO of US$207 million, higher than the year-ago period due to its recent acquisitions. Its distributed energy, storage, and sustainable segments generated a combined FFO of US$115 million, while the hydroelectric segment raked in US$96 million.
Brookfield commissioned 1,200 megawatts of new renewable energy capacity in the third quarter and will advance 7,000 megawatts of capacity in 2024, which should result in consistent dividend hikes over the next 12 months.
