For income investors with a long-term mindset, patience pays. For instance, buying and holding high-quality dividend stocks, especially those with consistent payout increases, can lead to higher income over time.
While many Canadian stocks listed on the TSX pay dividends, Telus (TSX: T), TC Energy (TSX: TRP), and AltaGas (TSX: ALA) are dependable investments to start a growing passive-income stream. These companies have robust fundamentals, growing earnings bases, stable cash flows, and sustainable payouts, enabling them to sustain and grow their dividends over time.
Against this background, let’s dig deeper to understand why these stocks could reward long-term investors with bigger cheques.
Source: Getty Images
Why Telus rewards patience
Telus is one of the top stocks to buy for a growing dividend income. This Canadian telecom giant has a strong track record of rewarding shareholders and has paid out over $21 billion in dividends since 2004. Further, Telus has increased its dividend 27 times since 2011. Currently, its dividend yield is north of 7.7%, placing it among the reliable high-yield stocks on the TSX.
Its growing payouts are covered through its steady earnings growth. Telus benefits from multiple revenue streams, a steadily expanding subscriber base, and impressively low customer churn. Further, the company’s focus on cost efficiency supports its bottom line and adds resilience.
Telus continues to invest heavily in its future, particularly through enhancements to its broadband and wireless networks. Upgrades to fibre and 5G infrastructure position Telus to retain and grow its customer base and support the expansion of its Internet of Things (IoT) offerings, a space where demand is accelerating. Through product innovation, broader sales reach, and leaner operations, Telus is well-positioned to drive earnings and dividend growth.
Looking ahead, Telus is targeting annual dividend growth of 3-8% through 2028, all while maintaining a payout ratio of 60-75% of free cash flow.
Why TC Energy rewards patience
TC Energy is another dividend stock that rewards patience. The energy infrastructure company operates an extensive network of natural gas pipelines, linking low-cost supply regions to high-demand markets. Its business model is primarily contract-based, ensuring consistent earnings and robust cash flow regardless of market conditions, which, in turn, supports its dividend payments.
The majority of TC Energy’s earnings stem from rate-regulated assets, which provide stable and low-risk income, crucial for sustaining and increasing dividends. Impressively, TC Energy has raised its dividend for 25 consecutive years and forecasts annual increases of 3-5%. Currently, it offers an attractive yield of approximately 5.1%.
Looking ahead, TC Energy is poised to generate strong cash flows, driven by its high-quality U.S. natural gas pipeline assets. Additionally, the company anticipates growth opportunities from rising LNG exports, increased energy demands from data centers, and expanded power generation. These factors reflect TC Energy’s strong fundamentals. Moreover, its robust project pipeline positions it for continued earnings growth and reliable dividend payouts.
Why AltaGas rewards patience
AltaGas is another stock that could reward patience with bigger cheques. Its rate-regulated utilities business generates steady earnings, positioning it well to pay and increase its dividend consistently. Notably, AltaGas’s earnings per share (EPS) have risen at a compound annual growth rate (CAGR) of around 14% in the last seven years. Thanks to a growing earnings base, AltaGas’s dividend has grown at a CAGR of 6% since 2021. Currently, it offers a yield of 3.1%.
Looking to the future, AltaGas’s low-risk energy infrastructure platform is expected to continue providing stable earnings to support its dividend program. In addition, its Midstream segment enhances the company’s resilience and will benefit from long-term contracts, higher volumes, and cost-control measures. AltaGas is also working to reduce its debt, which will strengthen its financial position and support long-term growth.
AltaGas anticipates its rate base will expand at a CAGR of 8% through 2029, paving the way for further increases in dividend payments. Management has set a target of growing dividends by 5-7% annually through 2030 while maintaining a sustainable payout ratio of 50-60%.
