The best dividend stocks offer the kind of dependable passive income you can rely on for decades. However, high-yielding dividends are not the only factor you should consider when investing in dividend stocks. If you want to maximize total returns, you must look beyond the yield. While that is an important quality, companies offering consistent dividend growth are often better positioned to provide greater value for shareholders in the long run.
Several Canadian stocks have consistently rewarded investors with a combination of reliable distributions and above-average capital gains. These businesses offer a steady passive income stream and access to meaningful wealth growth over time. For investors seeking income and long-term growth, here are two stocks that I consider some of the best picks on the TSX today.
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Brookfield Infrastructure Partners
Brookfield Infrastructure Partners (TSX: BIP.UN) is a $24.24 billion market capitalization global infrastructure firm that owns and operates high-quality and long-life assets across several industries worldwide. Its portfolio includes utilities, transport, midstream, data sectors, and more across Europe, the Americas, and the Asia Pacific markets.
Since the businesses under its belt operate under long-term contracts or in regulated markets, Brookfield can generate predictable overall cash flows. This allows the company to support consistent growth in funds from operations (FFO) and dividends. With most of its earnings backed by regulated or long-term, contracted assets, its business model provides high earnings visibility.
Brookfield Infrastructure Partners has increased its quarterly distributions for 17 straight years. As of this writing, it trades for $52.97 per share and pays investors US$0.455 per share each quarter, translating to a roughly 4.7% dividend yield that you can lock into your portfolio.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is one of Canada’s largest oil and natural gas producers. The $136.19 billion market-cap company headquartered in Calgary engages in the exploration, development, marketing, and production of crude oil and natural gas. The energy company is known for rewarding shareholders with reliable dividend growth over the years, and the stock has historically outperformed the broader stock market in terms of capital gains.
Marking the 26th year of consecutive dividend growth, CNQ stock recently increased its quarterly payout to $0.625 per share. Trading at $65.83 per share at the time of writing, it translates to a 3.80% annualized dividend yield. Supported by a portfolio of low-decline and long-life assets, it looks well-positioned to continue delivering reliable quarterly distributions for years to come.
Foolish takeaway
If you have contribution room available, buying and holding shares of dividend stocks in a Tax-Free Savings Account (TFSA) can be an excellent strategy. With your investments held in the account, any returns you generate from capital gains and dividends remain tax-free.
By reinvesting the dividends you earn to compound growth, you can accelerate wealth generation. With no taxes on withdrawals, the TFSA can become an invaluable tax-free investment vehicle with the right portfolio of dividend stocks. To this end, CNQ stock and BIP.UN stock can be ideal investments to buy and hold.
