Investing in Canadian dividend stocks can help generate consistent income, especially in today’s uncertain economic climate. Investors can build a portfolio that offers stability and passive income even amidst market volatility by focusing on Canadian companies with strong fundamentals, reliable earnings growth, sustainable dividend payouts, and secure yields.
Against this background, here are Canada’s two best dividend stocks, which can help generate steady income throughout economic cycles.
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Dividend stock #1
Canadian Natural Resources (TSX:CNQ) is one of the top Canadian dividend stocks to buy and hold for the long term. The energy company is known for its resilient business model, ability to expand its earnings, and solid dividend payment history.
This oil and gas producer has steadily increased its dividend at an impressive compounded annual growth rate (CAGR) of 21% for the last 25 years. Moreover, the stock also offers a forward yield of 5.5%, which enhances its appeal to investors seeking a high and sustainable yield.
The energy giant’s diversified, high-quality assets, efficient operations, and ability to generate solid cash flows position it well to generate solid total returns for its shareholders. Its strong financials have driven its share price higher over the past five years. For instance, CNQ has delivered stellar capital gains of over 342% in the last five years, growing at a CAGR of 34.6%.
Canadian Natural Resources’s payouts look sustainable, driven by its solid production mix, long-life and low-decline assets, and disciplined capital allocation, which support growth and drive its distributable cash flow. Further, its extensive undeveloped land bank will likely drive large-scale drilling programs, which will drive profitability, higher payouts, and future growth.
Meanwhile, CNQ’s extensive pipeline of low-capital projects and opportunistic acquisitions will support its future growth and distributions. Also, higher production from its zero-decline, high-value synthetic crude oil operations will keep its reserve replacement costs low and help add stability to its operations.
Overall, Canadian Natural Resources is well-positioned to pay and increase its dividends consistently in the long run.
Dividend stock #2
Fortis (TSX:FTS) is another reliable Canadian dividend stock investors could consider adding to their portfolios. This utility giant owns a diversified portfolio of regulated assets, which enables it to generate consistent earnings and predictable cash flows even amid market volatility.
Thanks to its low-risk earnings and growing cash flows, Fortis has consistently rewarded investors with dividend increases. Moreover, it offers a decent dividend yield. Fortis raised its distributions for 51 consecutive years and currently offers a dividend yield of 3.7%.
The utility company is well-positioned to continue to grow its dividend in the coming years, supported by its expanding rate base, regulated earnings, and robust cash flow. The company’s $26 billion capital plan will likely expand its rate base and generate low-risk earnings. Fortis’s management forecasts its rate base to grow at a CAGR of 6.5% through 2029 and expects its dividends to increase annually by 4-6% during the same period.
Further, its solid transmission investment pipeline and energy transition opportunities bode well for future growth and will likely support its payouts.
