Putting $1,000 to work in the stock market doesn’t require chasing volatile growth names or timing the market. For income-focused investors, August brings a solid entry point to lock in attractive dividend yields.
While $1,000 may not seem like a substantial investment, putting it into fundamentally strong, dividend-paying companies can create a solid foundation for long-term passive income, especially when dividends are reinvested and allowed to compound over time.
Here is exactly how I would split $1,000 across top-tier dividend stocks this August to maximize both yield stability and long-term capital appreciation.
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Top dividend stock #1: Enbridge
Enbridge (TSX: ENB) stands out as an attractive dividend investment this August, especially for investors seeking income backed by strong cash flows. Enbridge stock’s recent decline of roughly 13% over the past month has pushed its dividend yield to approximately 5.6%, improving the income proposition. However, the more important consideration is the sustainability of its payouts.
Enbridge has distributed dividends for more than 70 years and increased its annual payout every year since 1995. Its dividend is supported by highly contracted and regulated cash flow. Nearly all of its EBITDA comes from regulated operations or long-term take-or-pay contracts. These arrangements provide greater revenue visibility, helping stabilize earnings and distributable cash flow (DCF) across commodity cycles.
Enbridge is targeting about 5% annual growth in adjusted EPS and DCF per share in the medium term, driven by new assets placed into service and continued strength in its core businesses. At the same time, the company is targeting a sustainable DCF payout ratio of 60%–70%.
Enbridge has approximately $41 billion in secured capital projects, while strong asset utilization, favourable contracting conditions, and higher base rates will support earnings growth. Meanwhile, the expansion of its renewable power portfolio through long-term contracted projects provides an additional avenue for diversification and future cash generation.
Overall, Enbridge is a reliable income stock with the potential for continued dividend growth.
Top dividend stock #2: Hydro One
Hydro One (TSX:H) stands out as a compelling dividend investment for August, supported by the defensive characteristics of its regulated utility operations, predictable cash generation, and a clear pathway for future growth. Further, the recent decline of more than 11% in its share price over the past month offers an attractive entry point.
As a pure-play electricity transmission and distribution utility company, Hydro One does not operate power generation assets, making its business less risky. Nearly all its revenue comes from regulated operations, providing stable and predictable cash flow regardless of economic conditions. Thanks to its defensive business model and reliable cash flow, Hydro One has consistently rewarded shareholders with higher dividend payments.
Since 2016, Hydro One has increased its dividend at a mid- to high-single-digit compound annual growth rate, while its stock has delivered attractive capital gains of over 70% in the last five years. Management expects its rate base to expand by roughly 6% annually through 2027, providing a solid foundation for future earnings and dividend growth.
Hydro One is well-positioned to maintain its momentum. With rising electricity demand, continued grid modernization investments, a solid balance sheet, and a fully funded capital program, Hydro One is poised to deliver dependable capital gains and higher dividends for years to come.
