2 Canadian Dividend Stocks Yielding 4% That Appear to Have the Goods to Back It Up

These Canadian dividend stocks are dependable investments, offer attractive yield of over 4%, and are backed by solid businesses.

Key Points
  • These Canadian dividend stocks are yielding over 4% and have sustainable payouts supported by strong fundamentals, stable earnings, and long histories of consistent payouts.
  • Enbridge stands out with a 70+ year dividend history, predictable cash flows from regulated and contracted assets, and plans to return up to $45 billion in dividends over five years.
  • Bank of Nova Scotia sports decades of uninterrupted dividend payments, steady earnings growth, and a conservative payout strategy supported by diversified revenue streams.

Many Canadian stocks pay dividends and offer compelling yields. However, only a few have the goods to back up their payouts. Notably, these Canadian dividend stocks are dependable investments, backed by fundamentally strong businesses, with resilient earnings bases and sustainable payouts to cover their distributions.

In addition, these companies have a solid record of returning cash to shareholders. Years of uninterrupted dividend payments signal their ability to navigate changing market conditions.

Against this backdrop, here are two Canadian dividend stocks yielding over 4% that appear to have the goods to back it up.

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Canadian dividend stock #1: Enbridge

Enbridge (TSX: ENB) is a compelling Canadian dividend stock offering a yield of over 5% with strong financials to support future payouts. The energy infrastructure company has been paying dividends for more than 70 years and has consistently increased its distributions annually since 1995.

Enbridge has maintained and increased its dividend through multiple commodity price cycles and broader economic downturns, reflecting its ability to generate stable cash flows even in challenging environments. This consistency reflects the durability of its operations and disciplined capital allocation.

It benefits from a low-risk, diversified portfolio of energy infrastructure assets that helps mitigate earnings volatility. A significant portion of its EBITDA is derived from regulated operations and long-term take-or-pay contracts, which reduce exposure to commodity price fluctuations. These arrangements also provide a predictable revenue stream, with many contracts incorporating inflation protection, further supporting the stability of distributable cash flow.

Enbridge’s extensive network of pipelines and related infrastructure assets strengthens its long-term outlook. By connecting key supply basins with major demand centres across North America, Enbridge ensures high asset utilization while positioning itself to benefit from sustained energy demand.

Looking ahead, Enbridge targets distributing dividends of between $40 billion and $45 billion over the next five years, supported by continued growth in regulated and contracted cash flows. Moreover, it maintains a sustainable payout ratio of 60% to 70% of DCF.

Overall, Enbridge is a reliable dividend stock with strong underlying fundamentals to support its dividend payouts.

Canadian dividend stock #2: Bank of Nova Scotia

Bank of Nova Scotia (TSX: BNS) is another reliable dividend stock with the potential to sustain its payouts over time. The Canadian financial services giant has paid dividends since July 1833 and has maintained uninterrupted distributions since then. Over the past decade, its dividend has grown at an annual rate of 5%, reflecting stable underlying earnings expansion. Moreover, it yields 4.4%.

Management continues to maintain a disciplined approach to capital allocation, targeting a conservative payout ratio of 40% to 50%. This level is considered sustainable over the long term and provides a balance between rewarding shareholders and preserving capital for future growth.

The bank’s diversified revenue base supports its earnings stability and dividend payouts. Growth in loans and deposits, combined with lower funding costs, is expected to support income generation. In addition, expanding fee-based revenue streams, along with strength in underwriting and advisory businesses, are likely to contribute positively to overall performance.

Ongoing momentum in revenue, steady credit performance, a strong balance sheet, and continued operating efficiency should help cushion earnings through economic cycles and support the bank’s ability to maintain and grow its dividend over time.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Bank of Nova Scotia and Enbridge. The Motley Fool has a disclosure policy.

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