This is a guest contribution from Harvi Sadhra with Hashtag Investing
There’s a lot of talk on overheating in the stock markets today. The whole world is watching to see if the US Federal Reserve will take any steps to cool off rising interest rates, or if it will it let the game play out.
As there is talk of a market pullback in the TSX, it makes sense for investors to look at dividend stocks and even recession-proof stocks, as a steady source of passive income. Here are 3 of the best dividend stocks in the TSX.
Top Canadian Dividend Stock #1: Enbridge (ENB)
This midstream giant is on the list of several analysts as a buy-and-hold-forever stock. In fact, investors are so sure of the company that some of their bond investors (to the tune of $100 million) are willing to wait 91 years. That’s right, investors are willing to wait until 2112 for a 4.7% maturity rate.
The company reported its results for the fourth quarter and full year 2020, and adjusted EBITDA was on par with 2019 while DCF (distributable cash flow) was up 2%.
The company hit savings of $300 million in 2020 without the assistance of government programs and is targeting $100 million of savings in 2021. It has a $16 billion secured growth pipeline and is targeting a 5%-7% annual DCF growth until 2023.
Rising oil prices will boost both top and bottom lines for this midstream King as oil producers will increase production which means more oil in Enbridge pipelines. The best part about Enbridge is that the stock has a high dividend yield of 7.51%. It has increased its payouts consecutively for the last 26 years, and from the looks of it, isn’t going to stop.
Enbridge is also increasing its renewables portfolio as it prepares for the long term. It recognizes that the world is going green and it began planning for this a long time back. It has 43 renewable projects across North America and Europe. Out of its $12.6 billion growth backlog, around $1.6 billion is scheduled to be completed in the next three years as offshore wind power.
Top Canadian Dividend Stock #2: Fortis (FTS)
Fortis is one of the largest utility companies in the world with a dividend record that few others can match: It has increased its dividend for 47 consecutive years. That gives you an idea of the consistency and predictability of the company. And the company delivers a dividend payout of 4.03%. The company delivered 2020 adjusted net earnings of $1.19 billion, or $2.57 per share, up from $1.11 billion, or $2.55 per share in 2019.
In September 2020, Fortis rolled out its $19.6 billion five-year capital plan that reflected around $4 billion of annual investments in utilities. In the earnings call, David G. Hutchens, — President and CEO said, “Virtually all of our planned investments are regulated and consists of a diverse mix of highly executable, low risk projects needed to maintain and upgrade our energy infrastructure.”
The rate base is expected to grow from $30.5 billion in 2020 to over $40 billion in 2025, an increase of $10 billion. This is a compound annual growth rate of approximately 6%. Fortis is also confident about executing its 6% average annual dividend growth guidance through 2025. Very few companies are able to provide this kind of guidance on dividend growth.
The reason behind Fortis’ confidence is that it operates $50 billion in utilities across the US, Canada and the Caribbean. As CEO Hutchens indicated, almost all of its customers are rate regulated which gives the company the confidence to predict its finances accurately. Recession or no, pandemic or no, people still have to switch on lights at home. Fortis is as safe as they come.
Canadian Dividend Stock #3: TC Energy (TRP)
TC Energy is another stock in the midstream space that is considered to be a safe haven for investors. It has raised its dividend for the last 21 years and its current yield is a strong 6.25%. The company owns North America’s largest natural gas pipelines and transports over 25% of the continent’s natural gas requirements. It is an essential player in any natural gas related business in the continent.
The company has suffered a drawback with the cancellation of its Keystone XL oil pipeline project when US President Joe Biden revoked a key permit for the project, which was under construction. While the company was disappointed with the decision CEO François Poirier stressed the company had a “large and diversified asset base.”
TC Energy announced its earnings for Q4 and the full year of 2020. Its comparable earnings for Q4 2020 were $1.1 billion or $1.15 per share compared to $970 million or $1.03 per share in 2019. Income for 2020 came in at $3.9 billion, the same as 2019.
The company has said that capital spending for 2021 would come in at $7 billion. Its Q1 2021 will take a large non-cash charge thanks to the Keystone cancellation. TC Energy is also building the Coastal GasLink pipeline inBritish Columbia, and said that projects costs are expected to increase significantly due to permit delays and the COVID-19 pandemic.