The Smartest Dividend Stocks to Buy With $200 Right Now

These smart Canadian dividend stocks have a solid earnings base and are most likely to increase their dividends in the coming years.

Sneha Nahata ❯

Sneha is a M.Sc. in finance and has been a Motley Fool contributor since mid-2020. Sneha specializes in writing about bank, energy, consumer and TMT (technology, media, and telecom) stocks. She focuses on identifying winning long-term stock picks.

Published December 23, 2024 8:00 pm EST

Investing in high-quality Canadian dividend stocks will likely boost the potential of your income portfolio. Moreover, you can do so even with a small investment of, say, $200 right now. Several top Canadian stocks with fundamentally strong businesses, a growing earnings base, and solid dividend payments history are trading well within investors’ reach, making them compelling bets to generate a stress-free and growing passive income for decades.

With this backdrop, here are the three smartest Canadian dividend stocks to buy now with $200.

Telus

Telus (TSX:T) is one of the smartest dividend stocks for investors seeking to boost their income portfolio. This Canadian communication services provider has consistently generated profitable growth and solid free cash flows, supporting higher dividend payments. The telecom company has returned over $21 billion in dividends since 2004 and raised its dividend 27 times since 2011. Adding to the positives, the company offers a high yield of about 8.1%.

Telus’ payouts are supported by its ability to grow its earnings and commitment to reward its shareholders with higher cash. While it significantly raised its dividend under its dividend growth program, Telus plans to maintain this trend and increase future dividends by 7–10%. Moreover, its payout ratio of 60–75% of free cash flows is sustainable.

The company’s solid subscriber base growth, strong retention rates, and focus on cost efficiency will likely drive higher earnings and improve its margins, further supporting its future payouts. Further, the ongoing momentum in the health services division, mobile network expansion, and increase in residential internet, TV, and security subscribers will likely fuel its top line and accelerate its growth. Further, the company’s strategic efforts to monetize its assets will likely drive profitability and support its future payouts.

Fortis

Fortis (TSX:FTS) is another high-quality dividend stock for investors seeking worry-free income. This utility company is known for consistently paying and increasing its dividend regardless of economic cycles. Fortis has raised its dividend for 51 years in a row, and the streak is expected to continue, thanks to its low-risk earnings base, defensive business model, and regulated cash flow.

Notably, most of Fortis’s earnings come from regulated utility assets, implying that its payouts are relatively safe and sustainable. Furthermore, 93% of its operations deal with energy transmission and distribution, which makes its business resilient and ensures predictable returns. The company’s growing rate base will likely drive its future earnings and support higher dividend payments.

Fortis projects its rate base to increase at a CAGR of 6.5% through 2029. With its resilient business model and growing rate base, the company expects to increase its dividends by 4–6% annually. Further, its well-protected dividend yield of 4.1% makes it a safe and smart investment for growing passive income.

Hydro One

Hydro One (TSX:H) is an attractive dividend stock offering income, stability, and growth. The company operates regulated transmission and distribution assets in Canada. Since it does not generate power, this electric utility company is not exposed to commodity price volatility, making its business relatively stable. Further, its regulated asset base generates predictable cash flows, which supports higher dividend payments and boosts its share price.

Hydro One has consistently rewarded its shareholders with higher dividends since 2016. Further, its stock has delivered impressive returns of over 104% in the past five years, reflecting a CAGR of about 15.3%.

Its growing rate base and modernization of aging infrastructure will likely drive its higher earnings and dividends in the future. The company projects its rate base to grow at a CAGR of 6% through 2027, which will likely fuel its dividend growth at a similar rate. Also, Hydro One’s solid financial position and ability to capitalize on growth opportunities will likely lead to decent capital gains.