The Canadian equity markets have witnessed healthy buying over the last two trading days, with the S&P/TSX Composite Index rising 2.4%. Despite the recovery, I expect the equity markets to remain volatile due to the uncertainty over the impact of tariffs on global economic growth. Considering the uncertain outlook and retirees’ lower risk-taking abilities, I believe the following three stocks with solid underlying businesses and consistent dividend payments would strengthen their portfolios while delivering a stable passive income.
Source: Getty Images
Fortis
Given its regulated asset base, low-risk transmission and distribution business, and consistent dividend growth for 51 years, I believe Fortis (TSX: FTS) would be an excellent buy for retirees. Supported by its rate base expansion and improving operating efficiencies, the company has grown its earnings and cash flows at a healthier rate, supporting its stock price and dividend growth. Over the last 20 years, the company delivered an average total shareholder return of 10.2%, outperforming the broader equity markets.
Moreover, the electric and natural gas utility company is investing around $26 billion over the next five years to grow its rate base at an annualized rate of 6.5% through $53 billion. Its continued implementation of innovative practices and efficiency programs could lower its expenses and drive profitability. Amid these growth prospects, Fortis’s management hopes to increase its dividends by 4-6% annually through 2029. Further, the company could also benefit from falling interest rates, given its capital-intensive business.
Bank of Nova Scotia
Another safe dividend stock that retirees can rely on is Bank of Nova Scotia (TSX: BNS), which has been paying dividends uninterrupted since 1833. The company offers financial services in over 20 countries, enjoying stable cash flows and consistent dividend payouts. Also, it has raised its dividends at an annualized rate of 5.2% for the last 10 years while currently offering a juicy forward dividend yield of 6.1%.
Moreover, BNS is prioritizing its expansion in North America and has made a strategic investment by acquiring a 14.9% stake in KeyCorp. The deal would increase the company’s capital deployment in its priority markets. Further, it recently sold its banking operations in Colombia, Costa Rica, and Panama businesses to Davivienda in exchange for a 20% stake in Davivienda. This transaction could support its strategy of improving operational efficiency in its noncore markets and also reduce its common equity tier-one ratio by 10-15 basis points. Considering all these factors, BNS could continue paying dividends at a healthier rate.
TC Energy
My final pick would be TC Energy (TSX: TRP), which transports natural gas across Canada, the United States, and Mexico. Last month, the company raised its dividend by 3.3% (based on proportionate allocation after TC Energy’s spin-off of its liquid pipeline business), marking the 25th consecutive year of dividend growth. Its forward dividend yield currently stands at 4.99%.
Meanwhile, TC Energy continues to expand its asset base and hopes to put around $8.5 billion of assets into service this year. Also, it expects to make capital investments of around $6-$7 billion annually to grow its asset base in the coming years and support its financial growth. Amid these growth prospects, the company’s management expects its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to grow at a 5.7% compound annual growth rate through 2027, thus facilitating its future dividend growth. Moreover, the company has also strengthened its financial position by lowering its net debt-to-EBITDA ratio to 4.8, making it a safer bet for retirees.
