Cautious Investors: 2 Safer High-Yield Dividend Stocks for Canadians

Canadians should add Enbridge and Brookfield Renewable Partners on their watchlist for potential buy-the-dip opportunities on market corrections.

Key Points
  • With Canadian equities showing strong gains and stretched valuations, cautious investors are advised to emphasize reliable income, resilient businesses, and reasonable valuations — the article highlights two high-yield dividend picks.
  • Enbridge (TSX:ENB): 5.5% yield, 30 consecutive years of dividend increases, steady DCF with a 62% payout ratio and roughly $20B of growth opportunities through 2030.
  • Brookfield Renewable (TSX:BEP.UN): 5.1% yield, about 90% of cash flows contracted (avg 12 years) and a 220,900 MW development pipeline supporting multi-year distribution growth.

The Canadian stock market has enjoyed an impressive run in recent years. Using the iShares S&P/TSX 60 Index ETF as a benchmark, it generated total returns of roughly 23% annually, with distributions reinvested, over the past three years versus less than 13% annually over the past decade. While that momentum is encouraging, it also raises the possibility that stretched valuations could lead to more modest returns ahead.

For cautious investors, this could be a good time to emphasize reliable income, resilient businesses, and reasonable valuations. Two high-yield dividend stocks are potential options for Canadians seeking a combination of income and defensive qualities.

Aerial view of a wind farm

Source: Getty Images

Enbridge: A dependable income generator

At roughly $70 per share, Enbridge (TSX: ENB) offers a dividend yield of about 5.5%, substantially above XIU’s recent distribution yield of approximately 2.2%.

More importantly, Enbridge has a remarkable dividend record. The energy infrastructure giant has increased its dividend for 30 consecutive years and has paid dividends for more than seven decades. Its dividend growth has been relatively modest, at about 3% annually over the past five years, but consistency is particularly valuable for income-focused investors.

Enbridge’s underlying business is also defensive. Its liquids pipelines connect to roughly 75% of North America’s refining complex, while its gas distribution and storage operations serve approximately 7.2 million customers.

The company delivered steady results in the first half of the year. Adjusted EBITDA increased 1.1% to $10.6 billion, while distributable cash flow (DCF) rose 1.8% to $6.8 billion. DCF per share increased 1.6% to $3.11, supporting a sustainable payout ratio of roughly 62%. Management expects 2026 DCF per share of $5.70 to $6.10, implying a payout ratio of approximately 66%.

Enbridge also has roughly $20 billion of potential growth opportunities through 2030 across renewable power, gas distribution and storage, liquids pipelines, and gas transmission. With the shares trading at about a 12% discount to the analyst consensus price target, investors may be getting an attractive entry point.

Brookfield Renewable: High yield with growth potential

Investors seeking greater exposure to the energy transition could consider Brookfield Renewable Partners L.P. (TSX: BEP.UN).

The company owns and operates a global portfolio of hydro, wind, solar, distributed energy, and storage assets. Crucially for cautious investors, much of its electricity generation is sold under long-term contracts to utilities and large corporate customers. About 90% of its cash flows are contracted for an average of 12 years, while roughly 70% are indexed to inflation.

Brookfield Renewable has approximately 47,300 MW of operating capacity and a massive 220,900 MW development pipeline. That pipeline, combined with acquisitions and new projects, provides a potentially powerful source of long-term growth.

At under $43 per unit, the stock offers a distribution yield of about 5.1% and is fairly valued based on the analyst consensus price target.

The name has increased its cash distribution for about 16 consecutive years with a 15-year growth rate of 5.5%. Its recent distribution growth has been around 5%.

The bottom line

For cautious Canadian investors, Enbridge and Brookfield Renewable offer compelling combinations of high income, relatively predictable cash flows, and long-term growth opportunities. 

Neither stock is risk-free, but their defensive business models and attractive yields could make them worthy watch-list candidates and potential buy-the-dip opportunities on market corrections.

Fool contributor Kay Ng has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Renewable Partners and Enbridge. The Motley Fool has a disclosure policy.

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