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Grow Your Passive Income: 3 Dividend Stocks to Buy Now

The Motley Fool ·  08/27 16:40

Investing in dividend stocks is a great way to generate consistent passive income. However, to ensure that your income grows over time, it's crucial to invest in companies with solid fundamentals and expanding earnings base to support future dividend increases.

With this background, here are three Canadian stocks with the potential to steadily grow their dividends regardless of market conditions. These stocks can help create a reliable and growing passive-income stream.

Enbridge

With a stellar dividend payment history, visibility over future earnings, and distributable cash flow (DCF) growth rate, Enbridge (TSX:ENB) can be a reliable stock to start a growing passive income. Enbridge is an energy infrastructure company that transports and exports oil and gas. The company's pipeline network connects major supply and demand regions in North America, leading to higher utilization of its assets and generating steady cash flows.

Further, its diversified revenue stream, long-term contracts, and power-purchase agreements add stability to its earnings and cash flows, supporting higher dividend payments.

Enbridge has raised its dividend for 29 consecutive years. Moreover, given its growing earnings base, its dividend could continue to increase. The company expects its earnings and DCF per share to increase at a mid-single-digit rate in the long term. High utilization of its assets, contractual arrangements, multi-billion-dollar capital projects, and acquisitions will likely drive its earnings and future distributions.

Thanks to its growing earnings base, Enbridge will likely reward its shareholders with higher dividend payments. Besides growing passive income, Enbridge stock currently offers a compelling yield of 6.8%.

TC Energy

TC Energy (TSX:TRP) is another reliable company for investors to start a growing passive-income stream. Much like Enbridge, TC Energy has a solid history of increasing dividends for over two decades with visibility over future payouts.

For example, TC Energy's dividend has grown at a compound annual growth rate (CAGR) of 7% in the past 24 consecutive years. Further, the steady growth in its earnings and cash flows will likely drive its future distributions. Notably, TC Energy generates most of its earnings from rate-regulated assets and long-term contracts, which adds stability to its earnings and dividend payments.

TC Energy plans to grow its dividend by 3-5% annually. This growth will be supported by its regulated and contracted assets, which witness a high utilization rate. Additionally, the company's $31 billion capital program will likely bolster its future earnings, supporting higher dividend payments. Also, its focus on strengthening its balance sheet and planned divestitures will likely support its growth. Along with dependable dividends, TC Energy stock offers an attractive yield of 6.3%.

Canadian Utilities

Canadian Utilities (TSX:CU), with its stellar record of dividend growth, is a must-have stock for income investors. The utility company benefits from a relatively resilient business model and regulated and contracted cash flows.

Thanks to its high-quality earnings base, Canadian Utilities has uninterruptedly increased its dividends for 52 years. This dividend-growth history shows the strength of Canadian Utilities's business model and its ability to grow its earnings in all market conditions.

The company continues to invest in regulated utility assets, which will expand its earnings base and support future dividend payments. Moreover, Canadian Utilities is optimizing its energy infrastructure capital projects to bolster its earnings and support higher payouts. Overall, its defensive business model, growing cash flows, and solid track record of dividend growth make Canadian Utilities a dependable stock for growing your passive income. The utility company also offers a high yield of 5.4%.

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