When it comes to Canadian dividend stocks, there’s no question that one of the best and most popular companies investors turn to is Fortis (TSX:FTS). The ultra-popular utility is one of the best dividend stocks you can own because it has all the qualities of a top-tier income producer.
Because it’s a utility stock with operations in several different regions, its operations are incredibly defensive as well as diversified, which reduces even more risk.
Furthermore, it’s constantly recycling a portion of its retained earnings in order to continue growing its business. Finally, that consistent growth of its business, combined with the fact that Fortis ensures its payout ratio is kept sustainable, allows it to increase the dividend each year.
In fact, Fortis is one of only two stocks on the TSX with a dividend growth streak that’s lasted for longer than half a century.
However, the one downside to buying Fortis is that because it’s such a popular stock, it never trades that cheaply. Furthermore, because it’s never undervalued and the company is consistently keeping the payout ratio manageable, the stock’s yield sits just below 3.5% today.
Don’t get me wrong, that’s still a compelling yield given the reliability of Fortis, especially considering the 4% to 6% dividend growth Fortis typically offers annually. So the stock will be a core holding for many investors.
However, there are other Canadian stocks that offer many of the same qualities as Fortis, along with even higher dividend yields.
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A top utility stock offering a higher yield than Fortis
If you’re looking for a highly reliable utility stock and you prefer a higher dividend yield today over the annual dividend growth Fortis offers, then Emera (TSX:EMA) is a stock you’ll want to consider.
As another well-diversified utility company, Emera is one of the most defensive dividend stocks you can own.
Just like Fortis, demand for its revenue is steady whether the economy is growing or facing headwinds. In addition, it’s also regulated by the government, ensuring that its future revenue and earnings remain predictable.
And while Emera’s dividend growth streak of 19 years is much shorter than Fortis’s, it’s still impressive and shows just how reliable Emera has been.
Today, Emera stock offers a yield of 4.3%, compared to 3.5% from Fortis. However, Emera expects to increase its dividend by only 1% to 2% annually over the next few years, while Fortis is targeting growth of 4% to 6%.
So, if you’re considering Emera for its higher yield right now, you’ll likely have to sacrifice some dividend growth in the near term.
Two of the best blue-chip stocks on the TSX
There’s no question that utility stocks like Fortis and Emera are among the safest investments you can make. However, many blue-chip stocks are also reliable and defensive in their own right, and some offer dividend yields significantly higher than Fortis with similar potential for long-term dividend growth.
For example, Enbridge (TSX:ENB) may not be as defensive as a pure utility stock, but it’s a stock that’s as close as it gets.
Not only are its operations essential to the economy, but the structure of its business ensures that much of its revenue is stable and predictable. Furthermore, just like utility stocks, it’s a cash cow, allowing it to constantly reinvest in growth while simultaneously increasing the dividend each year.
In fact, Enbridge’s dividend growth streak of 30 years is more than a decade longer than Emera’s. And with Enbridge offering a yield of 5.7% at current prices, more than 2.2% higher than Fortis, it’s undoubtedly one of the best options dividend investors have on the TSX.
In addition to Enbridge, a high-quality telecom stock like Telus (TSX:T) is another solid choice Canadian investors have.
Just like Enbridge and utility stocks like Fortis, Telus earns a tonne of recurring revenue, and many of the services it provides are essential.
It’s also a cash cow that operates in an industry with massive barriers to entry, making it a business you can have confidence owning for years to come.
The best part about Telus, though, is that its current dividend yield is sitting above 8%, and more than double the 3.5% yield you can earn with Fortis stock.
