Yahoo Finance 3 of the Safest Dividend Stocks in Canada
Written by Robin Brown at The Motley Fool Canada
Dividend stocks tend to be relatively safe investments for a few reasons. Firstly, many dividend stocks tend to earn recurring, contracted, or regulated revenues/earnings. Many have stable operating models, so they can afford to pay regular dividends.
Secondly, any stock that pays a dividend needs to demonstrate discipline about how it manages its balance sheet and cash flows. Paying a dividend constrains capital, so managers need to ensure their business operates efficiently and prudently.
Thirdly, if they wish to grow their dividend, they also need to grow their earnings/cash flows in a predictable manner. If you want safe dividends, dividend-growth stocks can be some of the best. If you want safe and growing dividends, check out these three Canadian stocks.
This stock has grown its dividend by over 4,500%
Canadian National Railway (TSX:CNR) has increased its dividend by 4,572% since it started paying a dividend in 1996. Over the past 20 years, it has grown its dividend by a 12.6% compound annual growth rate (CAGR).
It only yields around 2%, but this company has demonstrated a great dividend-growth record. CNR has a very solid, defensive business. In many regions of Canada, it is the only viable network to move bulk goods.
As a result, the company has a great competitive moat. This allows it to have very strong pricing power that results in steady annual earnings growth.
CN has a dividend-payout ratio of 42%. This means it has ample room to keep paying/growing its dividend while also re-investing in its business. CN stock provides a great combination of growth and dividend income.
A safe tech stock with a long dividend history
Like CNR, Thomson Reuters (TSX:TRI) does not pay a large dividend. It only yields 1.5% today. Yet it has been paying and growing its dividend ever since 1989. Its current quarterly dividend is 375% larger than it was when it first started paying a dividend.
This stock is an industry leader when it comes to providing legal, tax/accounting, and government data, content, and software services. 79% of its total revenues are recurring and it has high +90% customer retention rates. Once this company’s services are embedded in a business or organization, they are very hard to replace.
Right now, this dividend stock has an earnings payout ratio of 61%. The company still has ample opportunities to re-invest in growth, so a smaller, steadily growing dividend seems like the right fit for this business. This is not a cheap stock, but it has a delivered strong +25% compounded total returns over the past five years.
A safe and steady stock for income
No list about safe dividends would be complete without Fortis (TSX:FTS) stock. It is perhaps not growing as fast as the above companies. Yet it does pay a slightly higher dividend with a yield of 3.8%.
With a market cap of nearly $29 billion, Fortis is one of Canada’s largest utilities with distribution and transmission operations across North America. The company has an incredible 49-year track record of consecutive annual dividend growth.
99% of its operations are regulated, so it earns a predictable baseline of income annually. The company expects to grow by around 6% a year for the coming five years. It believes this should translate into 4-6% annual dividend growth.
Fortis stock is a steady-as-it-goes investment. Its dividend-payout ratio sits comfortably below 80%. That is expected to drop, as it grows earnings slightly faster than its dividend rate in the near term. All around, this is a very safe business to buy and hold for long-term secure dividend income.
The post 3 of the Safest Dividend Stocks in Canada appeared first on The Motley Fool Canada.
Free Dividend Stock Pick: 7.9% Yield and Monthly Payments
Canada’s inflation rate has skyrocketed to 6.9%, meaning you’re effectively losing money by investing in a GIC, or worse, leaving your money in a so-called “high interest” savings account.
That’s why we’re alerting investors to a high-yield Canadian dividend stock that looks ridiculously cheap right now. Not only does it yield a whopping 7.9%, but it pays monthly!
Here’s the best part: We’re giving this dividend pick away for FREE today.
Claim your free dividend stock pick * Percentages as of 11/29/22
More reading
Brookfield Asset Management Spin-Off: What Investors Need to Know
Passive Income: 4 Safe Dividend Stocks to Own for the Next 10 Years
Fool contributor Robin Brown has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and Fortis. The Motley Fool has a disclosure policy.
2023
