The Bank of Canada cut its benchmark interest rate by 25 basis points last week to 2.5%. Additionally, economists are predicting one more rate cut this year. In this lower-interest-rate environment, investors can look to invest in quality dividend stocks to earn a stable, passive income. Additionally, investors can avoid paying taxes (on investments up to $102,000) by making these investments through their TFSA (Tax-Free Savings Account). Against this backdrop, let’s look at three top Canadian stocks that can deliver steady income.
Fortis
With 10 regulated utility assets spanning Canada, the U.S. and the Caribbean, Fortis (TSX: FTS) meets the electricity and natural gas needs of more than 3.5 million customers. The majority of its assets are tied to the low-risk transmission and distribution business, thereby making its financials less exposed to economic cycles and market volatility. Supported by these stable financials, the company has delivered an average total shareholders’ return of 9.6% for the last 20 years. Notably, FTS stock has increased its dividend consistently over the past 51 years, now rewarding shareholders with a forward yield of 3.6%.
After investing $2.9 billion in the first half of the year, the utility company remains on track to deploy $5.2 billion of capital this year. Additionally, the company expects to invest around $20.8 billion over the next four years to expand its rate base to $53 billion by 2029. Along with these expansions, favourable customer rate revisions and improved operating efficiency could further drive its financial growth. Amid these growth prospects, Fortis’s management is optimistic about raising its dividend by 4–6% annually through 2029, making it an attractive option for income-seeking investors.
Canadian Natural Resources
For income-oriented investors, Canadian Natural Resources (TSX:CNQ) stands out, having increased its dividend at a 21% CAGR (compound annual growth rate) over the last 25 years. The oil and natural gas producer’s diversified and balanced asset base, flexible capital allocation, lower capital reinvestment requirement, and efficient operations have led to a lower breakeven point, driving its profitability and cash flows. These healthy cash flows have allowed it to raise its dividends consistently. CNQ stock’s quarterly dividend payout of $0.5875/share translates into a healthy forward dividend yield of 5.3% as of the September 22 closing price.
Moreover, CNQ operates large, low-risk, and high-value reserves, with a proven reserve life index of 32 years. The company has planned to invest approximately $6 billion this year to bolster its production capabilities. Along with these organic growth initiatives, its continued acquisitions could support its financial growth in the coming quarters. Furthermore, the company could also benefit from rising energy demand resulting from growing economic and industrial activities, as well as increasing income levels. Considering all these factors, I believe CNQ would enable investors to earn a stable passive income.
Bank of Nova Scotia
For income-seeking investors, Bank of Nova Scotia (TSX:BNS) is noteworthy, having maintained an unbroken dividend record since 1833. It offers various financial services across multiple countries, thereby delivering stable and reliable cash flows, which enable it to pay dividends consistently. The stock currently provides a reasonable dividend yield of 4.9%.
Moreover, the company is expanding its business in the lower-risk, more stable North American market, while scaling down its operations in the Latin American region. This strategy could streamline operations and concentrate resources on higher-return opportunities, thereby enhancing profitability. BNS trades at a reasonable NTM (next 12 months) price-to-earnings multiple of 11.6, making it an attractive buy.
