Canadian investors are looking for top TSX dividend stocks that can deliver steady income growth and long-term total returns for a self-directed Tax-Free Savings Account or Registered Retirement Savings Plan (RRSP) portfolio.
Companies that increase their dividends every year tend to weather downturns relatively well and normally bounce back from pullbacks when market or sector conditions improve.
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Fortis
Fortis (TSX: FTS) is up about 50% in the past two years and trades near its record high. Investors who missed the rally should still consider the stock for a dividend portfolio, given the reliability of the revenue stream and solid growth plan.
Fortis owns power generation facilities, electricity transmission grids, and natural gas distribution utilities. Nearly all of the revenue comes from rate-regulated businesses. This means cash flow should be predictable and reliable.
Fortis is working on a $28.8 billion capital program that will raise the rate base from $42 billion to roughly $58 billion over five years. As the new assets are completed and start to generate revenue, the boost to cash flow should support planned annual dividend increases of 4% to 6% through 2030. Fortis has increased the dividend in each of the past 52 years.
Beyond that timeframe, Fortis has other projects under consideration that could get added to the growth program. In addition, Fortis would be a strong candidate to participate in Canada’s planned expansion of the national power grid.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) raised its dividend in each of the past 26 years. This is an impressive streak considering the volatility the energy market over that timeframe.
CNRL benefits from owning a diversified product portfolio that includes oil sands, heavy and light conventional oil, offshore oil, natural gas liquids, and natural gas production and extensive reserves. The company is good at moving capital around the assets to take advantage of the best margins available as energy prices change. CNRL also has the financial firepower to make large strategic acquisitions when the sector is under pressure. This adds reserves at a low cost, and the increased production drives revenue and profit growth when energy prices recover.
CNRL saw its share price soar earlier this year on the jump in oil prices caused by the closing of the Strait of Hormuz. The stock has since given back some of the gains, now trading around $56.50 compared to $69.50 in March.
Investors can take advantage of the dip to secure a dividend yield of 4.4%. Additional downside is certainly possible in the near term if oil prices continue to decline, but further weakness would be an opportunity to add to the position for a buy-and-hold dividend fund, as CNRL’s long-term prospects should be attractive.
The company is already benefitting from new pipeline capacity that recently came online and has the reserves to ramp up oil and gas production if proposed new oil and natural gas pipeline and export infrastructure gets built in Canada in the coming years.
The bottom line
Fortis and CNRL pay good dividends that should continue to grow. If you have some cash to put to work in a dividend portfolio, these stocks deserve to be on your radar.
