Owing to a lack of regular income, retirees have less risk-taking abilities and thus look for stable stocks that deliver consistent payouts. Given their risk-averse nature, Canadian retirees can buy the following three top dividend stocks to earn a stable passive income.
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Enbridge
Given its consistent dividend growth, stable cash flows from contracted businesses, and healthy growth prospects, I have chosen Enbridge (TSX: ENB) as my first pick. With its regulated cost-of-service and long-term, take-or-pay contracts, the diversified energy company generates stable and predictable cash flows irrespective of broader market conditions. These healthy cash flows have allowed the company to raise its dividends for the previous 30 years. Along with the consistent dividend growth, the company offers an attractive dividend yield of 6.1%.
Moreover, Enbridge recently acquired three natural gas utility assets in the United States, making it North America’s largest gas utility company. These acquisitions have further strengthened their cash flows while lowering business risks. The company is also continuing with its $27 billion secured capital program, expanding its midstream, utility, and renewable assets base. Amid these growth initiatives, management expects its DCF (discounted cash flows)/share to grow at an annualized rate of 3% through 2025 and 5% after that. So, I believe Enbridge is well-equipped to maintain its dividend growth, thus making it an excellent buy for retirees.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is another Canadian dividend stock that retirees may consider, given its proven record of consistently paying dividends since 1833. The financial services company generates healthy cash flow supported by its diversified revenue streams, extensive geographical presence, and growing loan portfolio, thus allowing it to pay dividends consistently. Also, it has raised its dividends at a 5.8% CAGR (compound annual growth rate) for the last 10 years and currently offers an attractive forward dividend yield of 5.5%.
Further, BNS has adopted a new strategy to increase its capital allocation towards high-return markets in North America. It recently completed the acquisition of a 10% additional stake in KeyCorp, thus raising its ownership in the financial services company to 14.9%. Further, the company’s operating and financial metrics are improving. With the Bank of Canada cutting interest rates four times last year, I expect economic activities to improve, thus driving credit demand and lowering delinquencies. Considering all these factors and its cheap NTM (next 12 months) price-to-earnings multiple of 11, I am bullish on BNS.
Fortis
Fortis (TSX: FTS), a regulated electric and natural gas utility company, is my final pick. The company’s financials and cash flows are less prone to market volatility owing to its operation of 99% regulated assets. Also, around 93% of the assets are involved in the low-risk transmission and distribution business, thus stabilizing its financials. Supported by these stable cash flows, the company has increased its dividend payouts for 51 consecutive years and currently offers a healthy dividend yield of 4.2%.
Moreover, Fortis is making substantial capital investments to grow its rate base. It has committed to invest around $26 billion from 2025 to 2029, expanding its rate base at an annualized rate of 6.5%. These expansion initiatives could boost its cash flows, thus allowing it to continue its dividend growth. Meanwhile, the company’s management hopes to raise its dividends by 4–6% annually through 2029. Considering all these factors, I believe Fortis would be an ideal buy for retirees.
