The Canadian stock market has been on a strong run. Using the iShares S&P/TSX 60 Index ETF as a proxy, it is up roughly 20% (with a total return of nearly 22%) year to date, impressively outpacing its 10-year average annual return of 11.6%.
While such gains are encouraging, it might also indicate optimism in the markets today. Long-term investors know that price appreciation is only half the story. The other half – dividends – can provide a reliable stream of passive income regardless of where markets move next.
If you’re looking for stocks that can deliver consistency, resilience, and sustainable payouts, two Canadian dividend stars stand out: Pembina Pipeline (TSX: PPL) and Sun Life Financial (TSX: SLF).
Source: Getty Images
Pembina Pipeline: Reliable income from essential infrastructure
Pembina Pipeline has long been a favourite among income investors, and for good reason. This Calgary-based energy infrastructure giant has delivered market-beating income and solid total returns over the past decade, with a compound annual growth rate (CAGR) of 11.3% in total shareholder returns.
At $52.45 per share at writing, Pembina offers a 5.4% dividend yield, more than double the market yield of about 2.5%. The company’s strength lies in its long-term, fee-based contracts that generate predictable cash flow from pipelines, processing facilities, and storage terminals. Only a small portion of its revenue is affected by volatile commodity prices, which helps shield investors from energy market swings.
While Pembina’s dividend hasn’t increased every single year, it has grown at a 10-year CAGR of about 4.8%. After a pullback from over $60, the stock trades at what analysts estimate to be an 11% discount to fair value — offering investors a chance to “buy the dip” for dependable income. Its 68% trailing-12-month (TTM) free cash flow payout ratio suggests the dividend remains well supported and sustainable.
For investors seeking a balance of yield, stability, and modest growth potential, Pembina Pipeline fits neatly into a diversified portfolio for passive income.
Sun Life Financial: A steady dividend growth story
If Pembina is about reliable yield, Sun Life Financial is about consistent dividend growth. The last decade plus illustrates the life and health insurance leader’s earnings quality, allowing it to increase its dividend every single year for the past decade at an 8.4% CAGR.
In fact, Sun Life raised its dividend by 4.5% this month, and because it typically boosts its payout twice annually, its TTM increase works out to roughly 8.6% — right in line with its 10-year average.
Trading near $81 per share after dipping from a 52-week high of $91, Sun Life offers a 4.5% dividend yield and, according to analysts, also trades at an 11% discount to fair value. With a payout ratio of about 60% of normalized net income, its dividend appears both healthy and sustainable. And investors can expect more increases to continue in coming years.
Investor takeaway
For investors who want their portfolios to work for them – whether the market is soaring or stalling – Pembina Pipeline and Sun Life Financial both deliver with steady, reliable passive income.
One offers high yield and stability; the other provides dependable dividend growth. Together, they are a good start for any Canadian income investor seeking consistency in an unpredictable world.
