Canadian dividend stocks remain a cornerstone for income seekers amid market volatility, offering stability through reliable payouts backed by resilient business models.
Here are three I think can provide investors with the sort of upside they’re looking for, before interest rates really come down this year (my base case).
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Dream Industrial REIT
Dream Industrial REIT (TSX:DIR.UN) is a leader in the real estate investment trust (REIT) world, particularly for those seeking exposure to industrial real estate.
We’re not making any more warehouses and distribution centres. And with a portfolio of such assets located in prime proximity to city centres in Canada and around the world, this is a company with a juicy 5.2% dividend yield I don’t think can be ignored.
I think investors would do well to consider this particular ETF in the face of declining interest rates. After all, falling risk-free rates boost the value of income-producing assets over time. And with plenty of funds from operations (FFO) growth expected over time from Dream Industrial (and a dividend payout ratio near 50%, very low for this space), this is a top income-producing stock with meaningful capital appreciation upside I still think is worth legging into here.
Enbridge
Another top defensive dividend stock I think is worth considering is Enbridge (TSX:ENB).
This pipeline operator delivers a robust 5.5% yield today, but many analysts suggest this company should be worth a lot more. I tend to agree.
The thesis is relatively simple and aligns with my commentary around Dream Industrial. We’re not really laying any more pipe down to move fossil fuels around North America, though there is some chatter on this front. (And on that note, if we do see any new pipelines approved, rest assured Enbridge will be near the front of the line to deliver that new infrastructure).
That said, I think Enbridge’s fundamentals support the company’s current 5.5% dividend yield well. The company brought in strong free cash flow of $3.8 billion last year, with earnings stability expected to continue for years to come. With long-term regulated contracts for most of its revenue, this is a stock providing stable revenue and earnings growth investors can bank on right now, in my view.
Fortis
Last, but definitely not least, we have one of my top picks in the Canadian market right now Fortis (TSX:FTS) to talk about.
Fortis offers a steady 3.3% yield, yet many in the market are still buying this top utility company. Why is that?
Well, Fortis has provided decades of dividend growth over time, with its current track record sitting at more than 50 consecutive years. That’s hard to come by in the market, and it means that investors who lock in that yield today are poised for much more upside over the long term from a passive income angle.
On the fundamentals side, there’s a lot to like about Fortis’ pricing power and ability to demand more from its residential and commercial customer base. With a 73% payout ratio, 7% expected annual rate base expansion over the long term (which the company will likely return to investors) and plenty of data centre growth underpinning these metrics, this is a stock with a growth angle as well.
So, don’t just buy these stocks for their yields today. Look down the road and realize the total return upside available from owning these boring but stable stocks right now.
