Dividend stocks return a portion of their profits to shareholders in the form of dividends. However, since dividends are not guaranteed, investors should focus on quality Canadian companies with strong cash flows, a track record of consistent payouts, and attractive yields to build reliable passive income.
Given this backdrop, investors may consider these two Canadian dividend stocks as long-term holds for building sustainable passive income.
Enbridge
Enbridge (TSX:ENB) is a Calgary-based diversified energy company that transports oil and natural gas through its pipeline network under a tolling framework or long-term take-or-pay contracts. It also operates low-risk natural gas utility assets and power purchase agreement-backed renewable energy assets. Meanwhile, the company generates approximately 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from regulated assets or long-term contracts, with roughly 80% of this tied to inflation.
Therefore, Enbridge generates stable and predictable cash flows, enabling it to reward its shareholders with consistent dividend payouts. It has paid dividends uninteruptedly for 70 years and also has raised its dividends at an annualized rate of 9% since 1995. As of the September 16 closing prices, ENB stock’s forward dividend yield stands at an attractive 5.6%.
Moreover, the rising energy demand amid population growth, rapid industrialization, and rising income levels could drive the demand for Enbridge’s services. Meanwhile, the company has identified growth opportunities worth approximately $50 billion and intends to invest $9–$10 billion annually to expand its asset base and capitalize on rising energy demand. Supported by these growth initiatives, the company’s management anticipates EBITDA and EPS (earnings per share) to grow at a 5% annualized rate in the medium term.
Its financial position has also improved, with its net debt-to-EBITDA multiple falling from 5 at the beginning of this year to 4.7 at the end of the second quarter. Besides, it trades at a reasonable NTM (next 12 months) price-to-sales multiple of 2.8. Considering all these factors, I expect Enbridge to maintain steady dividend growth, reinforcing its appeal to income-oriented investors.
Fortis
Fortis (TSX:FTS) is another reliable dividend stock to bank upon due to its stable cash flows from regulated assets, consistent dividend growth, and healthy dividend yield. The company operates 10 regulated natural gas and electric utility assets, serving 3.5 million customers across Canada, the United States, and the Caribbean.
With 99% regulated assets and 93% involved in the low-risk transmission and distribution business, its financials are less prone to macroeconomic volatility or economic cycles. Therefore, the company’s financials are stable and reliable, thereby allowing it to raise its dividend for 51 previous years. It currently pays a quarterly dividend of $0.615 per share, which equates to a forward dividend yield of 3.7% as of the September 16 closing price.
Fortis is also expanding its asset base and has committed to investing around $26 billion from 2025 to 2029. Driven by these investments, the company’s rate base could rise to $53 billion by 2029, reflecting a 6.5% annualized growth rate. Along with these expansions, favourable customer rate revisions and improving operating efficiencies could drive its financials in the coming years. Amid these growth initiatives, Fortis’s management is confident of raising its dividend by 4–6% annually through 2029. Further, the company also trades at a reasonable NTM price-to-sales multiple of 2.6, making it an excellent buy.
