When it comes to income, Dividend Knights are some of the best options investors can consider on the TSX today. These dividend stocks are companies that have increased their dividend each year for multiple consecutive years, usually well over five. And in the case of the ones we’ll discuss today, even longer. But first, let’s get into why these are a strong investment for any Canadian to consider.
Why Dividend Knights work
Dividend Knights are some of the best investments for multiple reasons. First off, they offer predictable income streams with dividend growth. Yet, these investments usually come with a low beta in a defensive sector. These stocks are usually involved in mature businesses, offering that predictable cash flow.
Investors will want to check a few things. First is how many consecutive years of dividend increases the company has held, referred to as a “streak.” Then, how much is that dividend yield, and whether it’s sustainable through the payout ratio. Furthermore, you’ll want to check the company’s free cash flow coverage to make sure the dividend can continue being well-covered. So now, let’s look at two dividend stocks that are in the perfect position.
FTS
First up, we have utility stock Fortis (TSX:FTS), which has raised its dividend for 50 years! This makes it one of two consecutive increases on the TSX today. The dividend stock checks all the boxes, operating within the defensive sector of utilities and with a dividend yield at 3.5% coming out at $2.46 each year.
The dividend stock is well-supported. Right now, the payout ratio is about 72%, with operating cash flow at $4.3 billion at writing. What’s more, it holds a very defensive 0.35 beta, all while making more plans for growth. This includes a five-year capital plan for $26 billion to grow its rate base. This would mean growing the dividend by 4% to 6% annually through 2029. For now, here’s how much investors putting $15,000 into Fortis stock could receive on the TSX today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| FTS | $70.21 | 213 | $2.46 | $523.98 | Quarterly | $14,954.73 |
CU
The other part of the pair? Canadian Utilities (TSX:CU), another utility stock that has raised its dividend for 51 years at writing. It holds a 4.7% dividend yield at writing, with an annual yield of $1.83. Now the payout ratio here is higher at 111%, yet it’s supported by an operating cash flow of $2 billion. Even so, investors will want to note that its debt and payout ratio are higher than Fortis’s, especially if they want continued dividends coming in.
The benefit for CU stock is that it’s a heavily regulated utility stock, which leads to a regulated project pipeline that can support long-term earnings. Management then actively invests in these growth areas. So investors here will need to balance out the riskier payout ratio with a higher dividend yield when making a decision. For now, here’s what a $15,000 investment can bring in for Canadians on the TSX today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CU | $38.75 | 387 | $1.83 | $708.21 | Quarterly | $14,996.25 |
Bottom line
All together, these are two solid dividend stocks with the most amount of consecutive increases seen on the TSX today. Fortis offers a lower yield, but a cleaner payout ratio, and Canadian Utilities vice versa. Yet both offer growth in dividends, as well as a stable pipeline of long-term projects. So if you’re looking for solid dividend stocks you can set and forget, these two belong on that watchlist.
