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Opinion: The 3 Best Dividend Stocks in Canada Right Now

The Motley Fool ·  09/22 09:30

Investing in the best Canadian dividend stocks can help generate a reliable and growing passive income for years. The dividends of these companies are supported by their solid fundamentals and a growing earnings base, which enables them to pay and increase their payouts over time.

While the TSX has multiple companies offering durable dividends, I'll focus on Canadian stocks with a solid history of uninterruptedly paying and growing dividends. Moreover, these companies will most likely increase their payouts in the upcoming years.

TC Energy

Speaking about the best Canadian dividend stocks, Canadians could consider shares of the energy infrastructure company TC Energy (TSX:TRP). The company is renowned for paying and raising dividends steadily, thanks to its diversified and utility-like assets that generate stable and predictable cash flows.

For instance, this energy company has increased its dividend at a compound annual growth rate (CAGR) of 7% for 24 consecutive years. Moreover, it currently offers a compelling yield of about 6.1%.

Its stellar dividend payment history reflects its stable earnings and solid cash flows. TC Energy earns about 95% of its income through rate-regulated assets and long-term contracts, which generate predictable and growing earnings. Further, the company benefits from higher asset utilization, which supports its payouts.

Going ahead, its $31 billion secured capital program will likely expand its earnings base and drive higher dividend payments. TC Energy is reducing debts and focusing on the divestiture of assets, which will strengthen its balance sheet and support its future growth. The company expects to increase its future dividend by 3-5% per annum, supported by its infrastructure assets and secured growth projects.

Canadian Utilities

Canadian Utilities (TSX:CU) is among the best dividend stocks in Canada right now. The utility giant has a remarkable history of growing its dividend for 52 years in a row. Moreover, Canadian Utilities has the longest streak of raising its annual dividends among all Canadian companies. This reflects the resiliency of its business model and management's commitment to enhancing its shareholders' value even amid the economic downturn.

Its steady payouts are supported by its low-risk business model and regulated long-term, contracted earnings. The company's growing rate base further helps strengthen its earnings. Most of the company's earnings come from regulated utility assets, so its payouts are well-covered and sustainable. In addition, it offers a yield of 5%, near the current price levels.

Canadian Utilities is well-positioned to increase its dividends further. It is investing in regulated utility assets, which will likely expand its earnings and support future dividend increases. The company also focuses on optimizing its energy infrastructure capital projects and diversifying its revenue base, which will likely support its earnings and payouts.

Toronto-Dominion Bank

Investors could consider buying Toronto-Dominion Bank (TSX:TD) stock for its long dividend payment history. This leading bank stock has been famous for paying uninterrupted dividends for 167 years. Moreover, this financial services company has grown its dividend by a CAGR of 10% since 1998, which is higher than its peers. It also offers a decent yield of 4.8%.

The bank's diversified revenues and resilient earnings support its dividend payments. Further, the bank's growing loans and deposit base, focus on efficiency, and solid balance sheet position it well to grow its future earnings and dividend payments. Moreover, its accretive acquisitions augur well for growth.

In summary, TD is an attractive stock for investors seeking worry-free passive income.

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