Investing in blue-chip companies that pay and consistently increase dividends can help investors generate solid income and decent capital gains over time. These large-cap companies have fundamentally strong businesses and a growing earnings base that support their share price and drive higher payouts.
With this background, here are the three blue-chip dividend stocks that every Canadian should own for worry-free passive income.
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Blue-chip dividend stock #1
Speaking of Canadian blue-chip dividend stocks, Enbridge (TSX: ENB) tops my mind. This oil and gas transportation company owns an extensive network of liquid pipelines that connect major supply and demand markets in North America. Moreover, its assets witness a high utilization rate that supports its financials and dividend payouts.
It is worth noting that this energy infrastructure company has regularly paid dividends for 70 years and raised them for three decades. Further, the company expects mid-single-digit growth in its earnings and distributable cash flow (DCF) per share in the long term, leading to higher payouts in the future. Moreover, Enbridge stock has a high yield of about 6.1%.
Enbridge will likely benefit from its diversified asset base, long-term contracts, regulated tolling frameworks, and growing utility footprint. Further, its growing portfolio of renewable energy assets positions it well to capitalize on energy transition opportunities. Moreover, its focus on strategic acquisitions and substantial secured capital projects will likely boost its revenues and cash flows, driving its dividends.
Blue-chip dividend stock #2
Fortis (TSX: FTS) is another attractive blue-chip dividend stock Canadians should own for stress-free income. This electric utility company is one of Canada’s most reliable dividend-growth stocks owing to its diversified portfolio of regulated assets, which generates low-risk earnings and predictable cash flows. It has raised its dividend distributions for 51 consecutive years, making it a Dividend King. Besides worry-free income, its stock has a decent yield of 3.9%.
Fortis’s resilient business model, growing rate base, and capital investments augur well for future growth and dividend payouts. The company’s $26 billion capital plan will help expand its rate base at a compound annual growth rate (CAGR) of 6.5% through 2029. This will enable the company to generate low-risk earnings and support dividend hikes. Fortis’s management expects to grow its dividends by 4-6% annually through 2029.
Moreover, its solid transmission investment pipeline and energy transition opportunities bode well for future growth and will likely support its payouts.
Blue-chip dividend stock #3
Large Canadian bank stocks like Bank of Montreal (TSX: BMO) are reliable investments to generate steady passive income. Notably, this blue-chip dividend company has been paying regular dividends for decades and has the longest streak of distributions among Canadian companies.
For instance, this financial services giant has distributed dividends for 196 years in a row. Further, its dividend has increased at a CAGR of 5.4% over the past 15 years. Meanwhile, Bank of Montreal offers a dividend yield of 4.3%.
The bank’s ability to consistently increase its earnings supports its payouts. Bank of Montreal’s diverse revenue sources, including high‐return wealth business, expanding loans and deposit base, solid credit performance, improving efficiency, and robust balance sheet, position it well to deliver solid earnings, which will drive its future payouts.
