Saving money for retirement makes sense. However, with their low risk of financial loss, bank savings accounts and Guaranteed Investment Certificates (GICs) generally offer too little in interest gains. It’s sometimes necessary to add some higher-risk investments in retirement portfolios to add capital growth potential without sacrificing their cash flow-generating power. Investors looking to build a steady stream of passive income without taking on excessive risk can still achieve their goal with quality dividend stocks.
By focusing on companies with strong cash flows, resilient business models, and consistent dividend growth, individuals can transform retirement savings accounts into passive-income machines with growth potential. Here are two top Canadian dividend stocks that fit the bill: Fortis (TSX:FTS) and Enbridge (TSX:ENB).
Fortis stock: A dividend all-star for financial stability
Fortis is a premier electric utility stock that has increased its dividend for 51 consecutive years — and counting. As a regulated utility provider with operations across Canada, the U.S., and the Caribbean, it generates stable and predictable earnings and cash flows that it generously shares with Fortis stock investors as quarterly dividends.
A new investment in FTS stock today could capture a 3.8% annual dividend yield, but there’s more to this seemingly low yield. Why? Fortis’s dividend payouts keep growing religiously. The utility has raised dividends at an average rate of 6.4% annually for a decade. What’s more, Fortis’s stock price has been rising with revenue and earnings growth, sustained by strategic reinvestments to compound investor returns far beyond GICs’ limited potential.
A $10,000 investment in Fortis stock a decade ago could have grown to a $24,380 position today with dividend reinvestment. Even if you didn’t reinvest dividends, the initial investment could have gained 66.8% in value over the past 10 years.
Most noteworthy, the dividend yield on the initial investment (yield on cost) could have risen to 6% annually today due to consistent dividend raises, far above any long-term GIC offerings available today.
Fortis stock is now a passive-income powerhouse in retirement portfolios that invested in FTS stock a decade ago. Management is executing a $26 billion five-year growth program that could support 6.5% annual revenue growth rates and sustain respectable annual increases in Fortis dividends over the next half-decade, further enhancing Fortis’s capacity to churn juicy yields to long-term-oriented investors, even during a trade war.
Enbridge stock: High passive-income yields with growth potential
Enbridge, the pipeline behemoth, is one of North America’s largest energy infrastructure companies and a high-yield dividend stock that’s a passive income powerhouse for Canadian investors. The company generates predictable contracted cash flows from long-term contracts in the oil and gas transportation sector.
Long-term contracts comprise most of Enbridge’s sales book, and recent energy tariffs on Canadian oil may do little to reduce pipeline demand. The company generates stable pipeline cash flows during oil booms and dips alike. Its strong moats aren’t easily replaceable. As long as Canadian oil and gas needs transportation to needy customers, Enbridge (and a few other pipeline operators) may remain preferred partners to an energy industry looking for low-cost delivery services.
Enbridge is one of the few companies that delivered on its financial guidance during the COVID-19 pandemic, and the company sees no threat from tariffs. Its contracts are tight, secured, and relatively immune. Customers will “eat” the tariffs.
A new investment in Enbridge stock earns a 5.9% dividend yield, up from a 3% yield a decade ago. Enbridge raised its dividends at an average growth rate of 10.1% over the decade. The company has raised payouts for 29 consecutive years now.
New investments in gas ecosystems and sustainable energy forays may help grow revenue, earnings, and cash flow and sustain dividend growth in the long term, making Enbridge stock a high-yield passive-income pick to buy with some of your retirement savings for recurring payouts.
Investor takeaway
By strategically investing in dividend-growth stocks like Fortis and Enbridge (among many others), Canadians can create powerful passive-income streams that outpace inflation and provide financial security. Whether you’re planning for retirement or simply seeking extra cash flow, these stocks offer a reliable way to make your money work for you.
