Blue-chip companies are those with large, well-established businesses that have weathered multiple economic downturns, driving their financial performance. Given their established operations, these companies offer steady returns while delivering stability. Therefore, these companies are ideal for long-term investing. Against this backdrop, let’s look at two blue-chip Canadian companies that offer higher dividend yields.
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Enbridge
Enbridge (TSX: ENB) is an energy infrastructure company that operates pipeline networks transporting oil and natural gas across North America. It is also involved in the natural gas utility and storage business while strengthening its position in the renewable energy business. Its financials have minimal exposure to commodity price fluctuations while earning around 98% of adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from regulated assets or take-or-pay long-term contracts. Additionally, approximately 80% of its adjusted EBITDA is inflation-protected.
Therefore, the Calgary-based energy company’s cash flows have been stable and reliable, irrespective of the macroeconomic conditions and commodity prices. Supported by these healthy cash flows, ENB stock has paid dividends for the previous 70 years. Additionally, it has uninterruptedly raised its dividends since 1995 at a 9% CAGR (compound annual growth rate), with its forward dividend yield currently standing at 6.1%.
Meanwhile, Enbridge has identified $50 billion in growth opportunities over the next six years and plans to make capital investments of $9 billion to $10 billion annually to expand its asset base. These expansions could boost its financial performance in the coming years.
The company’s debt-to-EBITDA multiple for the rolling 12 months stood at 4.9, which is on the higher side. However, the management expects increased contribution from its recent acquisitions towards its adjusted EBITDA to improve the leverage multiple in the coming quarters. With a liquidity of $13.4 billion at the end of the first quarter, the company’s financial position also looks healthy. Moreover, management expects to raise its dividends at an annualized rate of 3% through 2026 and 5% thereafter. Considering all these factors, I believe Enbridge is an excellent buy for income-seeking investors.
Bank of Nova Scotia
The Bank of Nova Scotia (TSX: BNS) is another blue-chip stock that investors can rely on for consistent dividend payments over the long term. The company operates in more than 20 countries, offering a diverse range of financial services. Given its diversified revenue source, cash flows have been healthy, enabling it to pay dividends uninterruptedly since 1833. Notably, the company has hiked its dividends at an annualized rate of 5.6% for the last 10 years and currently offers an attractive dividend yield of 5.9% as of the June 24 closing price.
Meanwhile, BNS is focusing on strengthening its operations in its core markets of North America while scaling back its Latin American operations to improve profitability. It has transferred its banking operations in Colombia, Costa Rica, and Panama to Davivienda while receiving a 20% ownership stake in the combined enterprise. The company has also strengthened its presence in the United States by acquiring a 14.9% stake in KeyCorp for US$2.8 billion. This transaction will allow BNS a cost-effective and low-risk means of deploying capital into the United States. Moreover, the company last month announced its intention to repurchase approximately 20 million shares over the next 12 months. Considering all these factors, I believe BNS can continue to reward its shareholders with healthy dividends.
