Since June, the Bank of Canada has cut its benchmark interest rates by 275 basis points to 2.75%. Furthermore, economists are predicting two more rate cuts this year. Amid falling interest rates, investors should look to invest in quality dividend stocks with healthy cash flows and consistent dividend payment history to boost their passive income. Against this backdrop, let’s look at three top TSX stocks that could bulletproof your income portfolio.
Fortis
Fortis (TSX:FTS) operates 10 electric and natural gas utility assets, serving around 3.5 million customers across the United States, Canada, and the Caribbean. Most of its assets are in a lower-risk transmission and distribution business, generating stable and reliable cash flows and facilitating its consistent dividend growth. The electric and natural gas utility company has raised its dividends for 51 consecutive years, while its forward dividend yield stands at 3.69% as of the May 21st closing price.
Moreover, Fortis is well-positioned to continue its dividend growth in the coming years amid rate base expansion. The company is progressing with its $26 billion capital investment plan, which could grow its rate base at an annualized rate of 6.5% through 2029. The company projects the cash generated from its operations and dividend reinvestment plans to meet 70% of these investments. Therefore, these capital investments won’t substantially raise the company’s debt. Further, favourable rate revisions, improving operating efficiency, and lower interest expenses amid falling interest rates could boost its profitability and cash flows, supporting its future dividend payouts.
Enbridge
Another Canadian stock with consistent dividend payments and dividend growth would be Enbridge (TSX:ENB). The energy infrastructure company operates a pipeline network, transporting oil and natural gas under the cost-of-service framework and long-term take-or-pay contracts. Its low-risk natural gas utility business and contracted renewable energy assets generate predictable cash flows, allowing it to pay dividends uninterruptedly for 70 years. Also, it has grown its dividends at an annualized rate of 9% for the previous 30 years and currently offers a juicy forward dividend yield of 5.97%.
Moreover, the growing energy demand has expanded Enbridge’s addressable market. The company has identified $50 billion of growth opportunities across its four business segments and is investing $9-$10 billion annually to expand its asset base. With liquidity of $13.4 billion at the end of its first quarter, the company is well-equipped to support its growth initiatives. Amid these growth initiatives, Enbridge’s management expects to raise its dividend at a 3% CAGR (compound annual growth rate) through 2026 and 5% thereafter, making it a top buy for income-seeking investors.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) has rewarded its shareholders with uninterrupted dividend payouts since 1833, making it my final pick. Its diversified revenue sources deliver stability to its cash flows, thus allowing it to reward its shareholders with consistent dividend payouts. The financial services company has also increased its dividends at a 5% CAGR for the previous 10 years and currently offers a juicy forward dividend yield of 5.93%.
Moreover, BNS is working on consolidating its operations in Latin America to boost profitability while expanding its presence in North America, which offers healthy economic growth prospects and a stable political environment. It recently transferred its retail banking operations in Panama, Costa Rica, and Colombia to Davivienda while receiving a 20% stake in the combined entity. The transaction could improve its operating metrics. Further, its acquisition of a 14.9% stake in KeyCorp has led to a $71 million contribution to its second-quarter adjusted net income.
Along with these growth initiatives, BNS could also benefit from rising credit demand due to falling interest rates. The company also trades at a reasonable next-12-month price-to-earnings multiple of 10.3, making it an excellent buy.
