The top Canadian dividend stocks with strong fundamentals, a resilient business model, and a growing earnings base are solid investments to generate regular passive income in all market conditions. So, if you’ve got $5,000, here are five Canadian stocks to buy and hold forever to enhance the income potential of your portfolio.
Source: Getty Images
Canadian Utilities
Canadian Utilities (TSX: CU) is a no-brainer dividend stock. The electric utility company has a low-risk earnings base that enables it to pay and increase its dividends regardless of the economic situation. For instance, it has increased its dividends for an uninterrupted 52 years, the longest among all Canadian companies. Moreover, the utility stock offers a solid yield of 5.2%.
The company’s payouts are supported through its highly regulated business model that generates predictable cash flows. Canadian Utilities’s ongoing investment in regulated utilities and long-term contracted assets will likely expand its rate base and drive earnings, supporting higher dividend payments. Moreover, its payouts remain well-protected through the growing rate base.
Enbridge
Enbridge (TSX: ENB) has a solid record of paying dividends for seven decades, making it worth buying and holding forever. Moreover, this Dividend Aristocrat has raised dividends for three decades. Besides its stellar dividend-growth history, the energy giant offers an attractive yield of 6.2%.
The company’s diversified revenue streams, long-term contracts, regulated tolling frameworks, and higher utilization of its pipeline system will drive its earnings and distributable cash flow (DCF). Further, Enbridge’s investments in traditional and renewable energy assets, strategic acquisitions, and secured capital projects are expected to enhance its cash flow, supporting dividend growth.
Enbridge projects a mid-single-digit growth in its earnings and DCF per share, which implies its dividend could increase at a similar pace. Moreover, its payout ratio of 60-70% of DCF looks sustainable.
Telus
The leading wireless service provider Telus (TSX: T) is a solid income stock. Its ability to grow profitably allows it to return higher cash to its shareholders. The communications company has distributed over $21 billion in dividends since 2004 and has raised its dividend 27 times since 2011. Additionally, it offers an ultra-high yield of over 8%.
Telus’s focus on growing its customer base, reducing churn, and lowering costs enables it to deliver higher profits and, in turn, supports its payouts. Further, the company’s expansion of network infrastructure and entry into high-growth avenues such as cybersecurity and digital transformation bode well for future growth.
TC Energy
TC Energy (TSX: TRP) is another compelling bet for income investors. This energy infrastructure company’s dividend has grown at a CAGR of 7% since 2000. TC Energy’s highly contracted and regulated asset base enables it to generate solid earnings and cash flow, supporting higher dividend payments.
The energy giant’s high asset utilization rate and secured capital projects will expand its earnings and drive cash flows. Further, its focus on productivity savings and debt reduction will enable TC Energy to boost shareholder value through higher payouts. Over the long term, it projects a 3-5% annual increase in its dividends and offers a healthy yield of 5.6%.
Bank of Montreal
Bank of Montreal (TSX: BMO) is a solid income stock for its unmatched dividend payment history. Notably, this leading Canadian bank stock has distributed dividends for 195 consecutive years — longer than any other Canadian company. Further, its dividend grew at a compound annual growth rate of 5% in the past 15 years, reflecting its ability to generate sustainable earnings across economic cycles and commitment to return higher value to its shareholders.
The financial services company’s diversified revenue stream, ability to expand its loan book and deposit base, steady credit performance, and improving efficiency will likely drive its earnings and dividend payments. Bank of Montreal sees high single-digit earnings growth over the medium term, which will likely support future dividend increases. Moreover, it offers a high yield of 4.6%.
