Every Canadian should hold a few quality blue-chip stocks in their portfolio. Blue-chip stocks have large market capitalizations, which often means they are widely held by long-standing institutional investors.
Likewise, blue-chip stocks tend to have long operational histories, an essential or contracted business model, a record of steady returns, and growing annual dividends.
Here are three blue chip dividend stocks every Canadian investor should contemplate holding.
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A blue-chip industrial stock
Canadian Pacific Kansas City (TSX: CP) has a market cap of $107 billion. That makes it the largest railroad in Canada. With its rail network expanding across Canada, the United States, and Mexico, it is now a major player in the North American market. This is a company that has been operating for 145 years. Its assets are irreplaceable and likely to be in operation for many years to come.
Canadian Pacific has weathered a tough freight market for the past few years. While it has not yet achieved its double-digit growth projections, it has largely outperformed peers in the past few years.
Likewise, the freight environment is starting to improve. This blue-chip stock just delivered a new grain transport record in May. After its merger with Kansas City Southern, the company is generating significant cash. Its debt has declined considerably.
Canadian Pacific stock only yields 0.8%. However, last year it raised its dividend 20%, and this year it increased it 17.5%. Also, it bought back around 5% of its shares outstanding over the year. If it can start hitting its growth targets, there will be attractive upside. In the meantime, collect a nice stream of shareholder returns.
A leading energy stock
If you want a higher dividend, Canadian Natural Resources (TSX: CNQ) is a great bet right now. This stock has pulled back 12% after oil prices have moderated on an Iran war resolution.
With a market cap of $122 billion, Canadian Natural is Canada’s largest energy producer. Even with prices moderating, Canadian Natural generates very strong cash flows. It can cover its capital plans and dividends when oil is as low as $40 per barrel.
After consolidating several oil sands projects, this blue-chip stock has the largest set of energy reserves in Canada and the second-largest in the world. Its deep 30-year inventory will support years of growing energy production.
This blue-chip stock yields 4.3% right now. It has raised its dividend annually for 26 consecutive years by a 20% compounded annual growth rate (CAGR). For a rising income stream and steady capital gains, Canadian Natural is a great stock to hold long term.
A blue-chip utility stock
Fortis (TSX: FTS) is another blue-chip stock you don’t want to ignore. With a market cap of $40 billion, it is a major regulated utility provider across North America.
When you combine dividends and capital returns, Fortis has delivered a market return. However, that return has come with significantly less volatility than the market. Given how essential its utilities are, it can persistently grow its earnings and its dividends.
Fortis has a 52-year history of consecutively growing its annual dividend. This blue-chip stock yields 3.2%. That will only grow as it targets 4–6% annual dividend growth over the years to come.
