Canada markets closed
  • S&P/TSX

    -26.49 (-0.12%)
  • S&P 500

    -8.55 (-0.16%)
  • DOW

    +15.57 (+0.04%)

    -0.0004 (-0.05%)

    -0.70 (-0.86%)
  • Bitcoin CAD

    +1,082.11 (+1.24%)
  • CMC Crypto 200

    -10.61 (-0.78%)

    -34.30 (-1.45%)
  • RUSSELL 2000

    +4.64 (+0.23%)
  • 10-Yr Bond

    +0.0030 (+0.07%)

    -32.23 (-0.18%)

    -0.08 (-0.60%)
  • FTSE

    -34.74 (-0.42%)
  • NIKKEI 225

    -36.55 (-0.09%)

    +0.0005 (+0.07%)

Worry-Free Dividends: 3 Stocks for Canadian Investors

A worker drinks out of a mug in an office.
Source: Getty Images

Written by Sneha Nahata at The Motley Fool Canada

Dividend stocks help investors to earn regular passive income. Moreover, the reinvestment of the same significantly enhances the overall returns in the long term. However, dividend payouts are not guaranteed. Thus, not all dividend-paying stocks are worth investing in.

Fortunately, the TSX has several high-quality stocks that have paid and increased dividends for years. These Canadian dividend stocks are supported by companies with solid fundamentals and relatively resilient business models. Moreover, these corporations have a growing earnings base and well-covered payout ratios. Further, the management of these enterprises has shown a solid commitment to enhancing their shareholders’ value, regardless of economic situation. These attributes make them a perfect bet to earn worry-free dividends.


With this background, here are three Canadian stocks that can help you earn worry-free dividends irrespective of market conditions.

Stock #1

Investors seeking worry-free dividends could consider investing in the shares of top Canadian utility companies. Utility companies have a regulated asset base and generate predictable cash flows, allowing them to enhance their shareholders’ value through higher dividend payments. Among the leading utility companies, Canadian investors could consider investing in Fortis (TSX:FTS).

Fortis operates a regulated electric utility business. Most of its earnings are generated through low-risk utility assets, so its payouts are well-covered and can be relied upon. Moreover, Fortis’s management remains committed to boosting its shareholders’ returns via consistent dividend growth.

Fortis increased its dividend for 50 years thanks to its growing and predictable cash flows. Moreover, it continues to expand its rate base, which will drive its future earnings and cash flows and support higher payouts. The company plans to grow its dividend at a compound annual growth rate (CAGR) of 4-6% through 2028 and offers a yield of 4.3%.

Stock #2

Canadian energy companies are also known for their solid dividend payment history. In the energy sector, investors can bet on Enbridge (TSX:ENB) for its stellar dividend payment history and the resiliency of its payouts. This energy infrastructure giant has paid dividends for over 69 years and increased its dividend for 29 consecutive years.

Enbridge’s diversified revenue stream, high asset utilization rate, power-purchase agreements, and long-term contracts drive its distributable cash flow (DCF) per share in all market conditions and enable the company to enhance its shareholders’ returns. Moreover, it has a sustainable target payout ratio of 60-70% of DCF.

Enbridge’s management expects its earnings per share (EPS) and DCF to increase at a CAGR of approximately 5% in the long term. This will help the company grow its dividend by low to mid-single-digit rates. While Enbridge’s dividend is well protected, it offers a worry-free yield of 7.3%.

Stock #3

Speaking of worry-free dividends, investors could rely on top Canadian banks. It’s worth noting that the leading Canadian bank stocks have been paying dividends for decades, making them dependable investments for regular passive income. Within the banking space, Bank of Montreal (TSX:BMO) stands out for its stellar dividend payment history, which shows management’s commitment to enhancing its shareholders’ value.

Bank of Montreal paid dividends for 195 years, the longest by any Canadian company. Moreover, it has consistently increased its dividend payments for years.

The financial services company’s ability to grow earnings in all market conditions supports its payouts. Its diversified revenue sources, growing loan portfolio, high-quality deposits, and steady credit performance support its revenue and profitability. Moreover, its improving operating efficiency drives its bottom line and dividend payments. Bank of Montreal currently offers a dividend yield of 4.7%.

The post Worry-Free Dividends: 3 Stocks for Canadian Investors appeared first on The Motley Fool Canada.

Should you invest $1,000 in Bank of Montreal right now?

Before you buy stock in Bank of Montreal, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bank of Montreal wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,271.97!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.

See the 10 stocks * Returns as of 5/21/24

More reading

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.