The sticky inflation and concerns over the impact of Donald Trump’s protectionist policies have turned equity markets volatile. In this uncertain outlook, investors can strengthen their portfolios by adding quality dividend stocks that are less susceptible to market fluctuation due to their healthy cash flows and consistent dividend payouts. Against this backdrop, let’s look at my three top picks.
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Enbridge
Enbridge (TSX: ENB) is an excellent dividend stock to buy in this volatile environment due to its stable cash flows, consistent dividend growth, and high yield. The company operates pipeline networks transporting oil and natural gas across North America. Its tolling framework and long-term take-or-pay contracts shield its financials from market volatility. Also, the company sells the power generated from its renewable energy facilities through long-term contracts, stabilizing its cash flows and allowing it to pay dividends consistently. The Calgary-based midstream company has been paying dividends for 69 years. ENB stock has also raised its dividends for 30 years and currently offers an attractive dividend yield of 6.3%.
Meanwhile, Enbridge plans to invest around $8–$9 billion annually, expanding its midstream, utility, and renewable assets. Besides, the company acquired three utility assets for $19 billion last year, improving its cash flows. Amid these growth initiatives, the management projects its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to be between $19.4–$20 billion, with the midpoint representing a 9.4% increase from the previous year. Considering these healthy growth prospects, I believe Enbridge’s future dividend payouts will be safer, making it a compelling buy.
Fortis
Another dividend stock that I am bullish on is Fortis (TSX: FTS), which has raised its dividends for 51 years. The company earns stable and predictable cash flows, operating 10 regulated utility assets across Canada, the United States, and the Caribbean. Its regulated asset base and low-risk utility businesses stabilize its cash flows, allowing it to raise dividends consistently. With a quarterly dividend payout of $0.615/share, it currently offers a forward dividend yield of 3.9%.
Meanwhile, the electric and natural gas utility company continues to expand its asset base with a capital investment of $26 billion, spanning five years, and growing its rate base at an annualized rate of 6.5%. The company expects to fund around 70% of these projects through the cash generated from its operations and dividend reinvestment plans. So, these capital investments would not substantially raise its debt levels. Amid these growth prospects, the company’s management hopes to increase its dividends at an annualized rate of 4–6% in the coming years, thus making it an attractive buy.
Bank of Nova Scotia
Bank of Canada (TSX: BNS), with its consistent dividend payouts since 1833, is my final pick. The company operates in over 20 countries and provides various financial services, generating steady earnings across multiple market conditions, thus supporting its consistent dividend payouts. Also, it has raised its dividend payouts at an annualized rate of 5.2% for the last 10 years and currently offers a juicy forward dividend yield of 5.9%.
Focusing on improving profitability in its non-core business, BNS has transferred its Colombia, Costa Rica, and Panama businesses to Davivienda in exchange for a 20% stake in the combined entity. The transaction could improve its CET1 ((common equity tier-one) ratio by 10–15 basis points amid a decline in risk-weighted assets. The company has also raised its stake in KeyCorp to 14.9%, thus deploying its capital in the high-growth United States and boosting shareholders’ returns. Besides, falling interest rates could boost economic activities, driving credit demand that could benefit BNS. So, I believe the company is well-positioned to continue paying dividends at a healthier rate.
