Leading Canadian stocks from the energy, utility, and banking sectors are known for their resilient dividend payments regardless of the economic situation. The durability of their payouts and solid fundamentals make these Canadian dividend stocks compelling investments for generating stress-free passive income. Against this background, here are my top picks for income investors.
My top pick from the energy sector
Canadian Natural Resources (TSX:CNQ) is one of the most dependable dividend stocks in the energy sector. The oil and gas producer has a solid dividend growth and payment history. Moreover, it offers a healthy yield and is well-positioned to continue growing its dividend payments in the future.
The Canadian energy giant has consistently increased its dividend for the past 25 consecutive years at an average annual growth rate of 21%. The company’s solid payouts and consistent dividend growth reflect its ability to grow its earnings and distributable cash flows across all economic and commodity cycles. Canadian Natural Resources pays a quarterly dividend of $0.563, reflecting a high yield of 5.1%. Besides regular income, Canadian Natural Resources has delivered significant capital gains over the past five years.
The company’s focus on high-return projects, efforts to improve costs and reduce debt, and sustainable free cash flow generation will likely support its future payouts. Further, the Canadian energy company is poised to benefit from its diversified production mix, low maintenance capital requirements, and long-life, low-decline asset base. Additionally, its strategic acquisitions and a strong balance sheet will likely accelerate its growth, enabling Canadian Natural Resources to deliver strong free cash flow, pay and increase dividends, and push its stock higher.
My top pick from the utility sector
Utility companies are known for their resilient business model, regulated operations, and predictable cash flows, which support their solid dividend payments. Within the sector, Canadian Utilities (TSX:CU), with its long track record of delivering earnings and dividend growth, stands out as the top pick for generating stress-free income.
Canadian Utilities has consistently grown its dividends for 52 consecutive years, which reflects the resiliency of its payouts and management’s focus on rewarding its shareholders. This utility giant’s rate-regulated business generates low-risk earnings, supporting its quarterly distributions. Besides consistently paying and increasing its dividends, Canadian Utilities stock offers a yield of 5.2%.
Canadian Utilities is well-positioned to drive its earnings and future payouts, supported by its regulated and contracted assets. Ongoing investments in regulated assets will further expand its rate base and enable it to generate substantial low-risk earnings to support higher dividend payments. Further, its contracted assets are likely to generate steady income led by multi-year contractual arrangements and a high-quality, diverse customer base.
My top pick from the banking sector
The leading Canadian banking stocks have been popular for paying dividends for over a century. One among them is Toronto-Dominion Bank (TSX:TD), which has paid dividends for 167 consecutive years. Moreover, Toronto-Dominion Bank’s dividend has grown at a compound annual growth rate (CAGR) of 10% since 1998, the highest growth among its peers. Besides solid dividend growth, it offers a decent yield of over 4.8% and has a sustainable payout ratio of 40–50%.
The bank’s ability to generate steady earnings and maintain a conservative payout ratio supports its dividend growth.
Its diversified revenue streams, expansion of loans and deposit base, and operating efficiency position it well to deliver solid earnings. Furthermore, Toronto-Dominion Bank’s solid balance sheet and accretive acquisitions will accelerate its growth, supporting higher payouts.
