When the market has a strong run, even great Canadian dividend stocks can take a breather. Sometimes, share prices of fundamentally strong companies also fall simply because markets move in cycles. For long-term investors, those dips can be a great opportunity. But you may want to keep your focus on businesses with steady cash flow and a history of rewarding shareholders. And two such Canadian dividend stocks that will look even more interesting on a pullback are Alaris Equity Partners (TSX: AD.UN) and Enbridge (TSX: ENB). Let me explain why.
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Alaris Equity Partners stock
If you don’t know it already, Alaris Equity Partners is a specialty finance company, providing preferred equity to private businesses across North America. In simple terms, it invests in companies and receives structured, predictable payments in return. Those payments help fund its own generous dividend.
Right now, Alaris stock trades around $22 per share with a market cap of roughly $1 billion. It also offers an annual dividend yield of 6.6% at this market price, higher than many other companies on the Toronto Stock Exchange.
What makes Alaris different is its focus on downside protection. Its investments usually come with strong agreements and priority claims on cash flow. That means it often has more protection than common shareholders if a partner company runs into trouble.
In its latest results, Alaris reported solid revenue growth with the help of new investments and built-in increases to some of its existing agreements. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and distributable cash flow also rose on a YoY (year-over-year) basis, showing that its diversified portfolio is holding up well.
Alaris continues to reinvest capital into new opportunities while keeping its payout ratio at disciplined levels. If its share price pulls back, investors could lock in an even higher yield from a business designed to generate stable income for decades.
Enbridge stock
As one of the most popular Canadian dividend stocks, many income-focused investors already hold Enbridge as their core position. The Calgary-based company operates a vast network of crude oil and natural gas pipelines across North America. It also has growing renewable power and utility operations.
Currently trading around $69 per share, following the 12% rise over the last 11 months, ENB stock has a market cap of over $150 billion. At this market price, it has a 5.7% annualized dividend yield. Even more impressive, Enbridge has raised its dividend for over three decades.
The company’s strength comes from its business model, as most of its EBITDA comes from long-term contracts or regulated assets. This means it does not rely heavily on daily swings in commodity prices. Enbridge’s recent U.S. gas utility acquisitions and continued strength in its liquids pipelines business are continuing to contribute to its financial growth.
More importantly, Enbridge has a clear growth plan. The company continues to invest billions in expanding its utility rate base, upgrading gas transmission systems, and developing select renewable projects. These investments are expected to support its stable annual cash flow growth, which should help it keep increasing its dividend over time.
