The right dividend stocks can go a long way in supplementing your income and providing financial peace of mind. Whether you use your dividend payments as another source of income or you reinvest them, they are definitely a valuable tool in growing your financial wealth. But how do we know which dividend stocks to buy when there are so many options?
In this article, I’ll discuss two dividend stocks that offer reliable and sustainable dividend income for their shareholders.
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Chartwell Retirement REIT
As an owner and operator of a range of senior housing communities, Chartwell Retirement Residences (TSX: CSH.UN) is well-positioned to continue to provide dividend income to its shareholders. Canada’s population is aging. In fact, approximately 20% of the population is over 65 years old. And this number is expected to increase steadily in the coming years.
This has translated into strong demand for senior living, which is something that Chartwell has been benefitting from. In Chartwell’s third quarter, revenue increased 28% to $282 million. Also, funds from operations increased 30.8% to $73.1 million and net operating income increased 15.8%.
This has been driven by strong occupancy, which is being fueled by a very favourable supply/demand environment. Simply put, demand is very strong and supply is limited. In fact, to maintain a healthy supply/demand balance in the next 10 years, the sector would need to build 200,000 suites, which is almost 10 times the number built in the prior 10 years.
So, we can see that Chartwell is operating in a very favourable environment today and that this environment is likely to persist for some years. And in response to the strong cash flows that the company is generating, Chartwell’s dividend will likely be increased in the very near future.
Chartwell is currently yielding just over 3%.
Tourmaline
As one of Canada’s largest natural gas producers, Tourmaline Oil Corp. (TSX: TOU) is also very well-positioned as a top dividend stock. Just as Chartwell is benefitting from some very positive fundamentals in its industry, so is Tourmaline.
The North American natural gas industry is also looking forward to very strong demand. This is coming from a variety of sources, all of which have really long growth tailwinds – for example, strong growth in demand from liquified natural gas, or LNG. This has already been happening, but more so in the U.S. With the recent ramping up of LNG Canada, Canadian natural gas producers will see a step change in demand. This demand boost will drive prices and volumes higher for producers like Tourmaline.
Tourmaline reported lower cash flow in its latest quarter, down 3% to $719.6 million. This was due to weak natural gas prices in Canada. In fact, prices were at their lowest levels in over 30 years in the third quarter. Yet, Tourmaline was still able to generate significant cash flows.
I expect that the coming quarters and years will see stronger natural gas prices, along with robust activity. This will translate into stronger cash flows for Tourmaline and more dividends for its shareholders.
Tourmaline is currently yielding 3.1%.
