Blue-chip companies are known for their strong fundamentals, consistent dividend payouts, and steady long-term growth potential. Given their large market capitalization, well-established businesses, healthy financial performance, and solid balance sheets, these companies are less prone to market volatility, thereby making them safer investment options. Against this backdrop, let’s look at three Canadian blue-chip stocks with dividend yields over 5%.
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Enbridge
Enbridge (TSX:ENB) is a diversified energy infrastructure company that earns around 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from regulated assets and long-term take-or-pay contracts. It has minimal exposure to commodity price fluctuations, and around 80% of its adjusted EBITDA is inflation-indexed. Therefore, the company enjoys healthy cash flows, enabling it to reward shareholders with consistent dividend payouts over the past 70 years. Also, it has grown its dividend at an impressive compound annual growth rate (CAGR) of 9% since 1995 and currently offers a healthy forward dividend yield of 5.71%.
Moreover, Enbridge is expanding its asset base and expects around $23 billion in assets entering service through 2027, boosting its financials. Additionally, it has identified $50 billion in growth opportunities across its business segments for the rest of this decade, providing more visibility into its growth prospects. Along with these healthy growth prospects, the company has also improved its financial position by lowering its net debt-to-adjusted EBITDA ratio from five at the beginning of this year to 4.7. Considering all these factors, I believe Enbridge can sustain strong dividend payments in the coming years.
Canadian Natural Resources
The second blue-chip stock that I believe would be an excellent buy is Canadian Natural Resources (TSX:CNQ), which operates oil and natural gas producing facilities in Western Canada, Offshore Africa, and the North Sea. With its diversified asset base, lower capital reinvestment needs, and efficient operations, the company has a lower breakeven point. Therefore, it enjoys healthy cash flows, thereby allowing it to raise its dividend at a 21% CAGR for the previous 25 years. The company’s current quarterly dividend of $0.5875 yields 5.38% on a forward basis.
CNQ is also strengthening its production capabilities through both organic and inorganic growth initiatives. The company aims to drill 182 net primary heavy crude multilateral wells this year while also pursuing strategic acquisitions. With a lower breakeven point, these expansion initiatives can boost both revenue and profitability, thereby strengthening the company’s overall financial performance. As a result, I believe CNQ is well-positioned to sustain a strong dividend-growth trajectory.
Telus
Telecommunication companies generate strong cash flows from recurring revenue streams, making them attractive options for income-focused investors. Meanwhile, I have chosen Telus (TSX:T), one of the three top players in the Canadian telecom sector, as my final pick. Demand for telecommunications services continues to rise, driven by the digitization of businesses and the growing adoption of e-learning and remote work. Amid rising demand, the company continues to expand its 5G and broadband infrastructure through $70 billion in capital investments over the next five years. These expansions could expand its customer base, thereby driving its financial performance.
Additionally, Telus’s healthcare segment has continued to perform well, expanding through strategic investments, innovative product offerings, and strengthened sales channels. Along with these healthy growth prospects, its solid financial position with liquidity of $6.1 billion makes its future dividend payouts safer. Meanwhile, Telus has raised its dividend 28 times since May 2011 and currently offers a healthy forward dividend yield of 7.88%.
