The last few years have made it clear that having merely one revenue stream is no longer sufficient if you want to achieve financial freedom. Setting aside cash in a high-interest savings account might get you some returns, but inflation can make it seem the same as hiding money under your mattress. The returns can’t keep pace with rising prices, effectively making your savings lose value over time.
Stock market investing is an excellent way to make the most of the money you can save from your paycheck. Focusing on building a high-quality portfolio of reliable dividend stocks can be an excellent strategy to get the kind of returns that can help you keep pace with, or even beat, inflation.
Dividend stocks with solid fundamentals, defensive business models, and a proven record of paying and increasing payouts are not immune to risks. Still, they’re the safest bets to generate a steady passive income. Considering this, here are three of my favourite picks from the TSX.
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Fortis
Fortis (TSX: FTS) is a staple holding in many investment portfolios, especially for those seeking passive income. The $35.41 billion market-cap utility holdings company owns and operates several natural gas and electricity utility businesses. Utility stocks are considered boring due to a lack of drastic capital gains, but they make up for that with reliable cash flows.
The very nature of the business is defensive. People need utilities regardless of how bad the economy is, virtually guaranteeing Fortis’s ability to generate stable and predictable revenues. Its long-term contracted assets contribute to most of its income. Fortis is considered dividend royalty, with a 52-year track record for dividend growth. As of this writing, it trades for $70.31 per share and boasts a 3.50% dividend yield.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is another reliable dividend stock with an excellent track record. The $95.14 billion market-cap energy company engages in exploring, developing, marketing, and producing crude oil and natural gas. The company boasts a portfolio of high-quality assets, a sustainable payout ratio, and a resilient cash flow. All these qualities combine to make it a reliable dividend-paying stock.
CNQ stock has increased its payouts for the last 25 years. Its low-decline and long-life assets are well-positioned to offer the kind of stability it needs to continue its excellent record. As of this writing, CNQ stock trades for $45.55 per share and boasts a 5.16% dividend yield that you can lock into your portfolio today.
Enbridge
Enbridge (TSX: ENB) is among my favourites for dividend-focused investments. The $149.31 billion market-cap firm is a diversified energy company. It boasts an extensive network of midstream assets serving the energy industry, providing transport for hydrocarbons produced and used in North America. It also operates Canada’s largest natural gas distribution company and owns a regulated natural gas utility business.
The fact that it also has a growing renewable energy business means it is future-proofing itself for a greener energy industry. Everything about the company points to it being a solid investment. Enbridge has increased its payouts for three decades, and it looks set to continue its streak. As of this writing, it trades for $68.46 per share and boasts a 5.50% dividend yield.
Foolish takeaway
Allocating a portion of your Tax-Free Savings Account (TFSA) to hold and build up a dividend-focused portfolio can be even better. In a TFSA, all the earnings from your investments can grow tax-free because you’re using taxed money to invest. This means no taxes on interest, capital gains, or dividends.
You can also reinvest the dividends to accelerate your wealth growth through the power of compounding. To build such a portfolio, ENB stock, FTS stock, and CNQ stock can be excellent foundations to kick things off.
