Interest rates are rising. How fast and how far, we don’t really know. But make no mistake, they are rising.
And while dividend stocks in the utilities and pipeline industries can generally be expected to see downward pressure because of this, I think the upside pressure is greater, as investors take a more defensive stance in their portfolios.
So, put your money to work to achieve financial independence with the following two top dividend stocks, whose histories are evidence of their value for investors.
Enbridge (TSX:ENB)(NYSE:ENB)
With a dividend yield of 6.28%, and a stable and reliable history, Enbridge is a utility stock for investors who are looking for stability, reliability, capital preservation, and income.
Since 1996, investors have enjoyed 22 years of dividend increases, with a 33% dividend increase in 2015, a 14% increase in 2016, a 15% increase in 2017, and a 10% increase in 2018.
Going forward, management expects the dividend to increase 10% next year and 5-7% thereafter.
And while that 5-7% growth rate in dividends is lower that the company’s prior guidance, Enbridge stock price has declined sharply since January 2017, by 25% to be more precise, and in my view this stock price decline makes up for the lower dividend.
So, this looks like a good entry point for investors looking to get more defensive and to lock in their financial independence.
TransCanada (TSX:TRP)(NYSE:TRP)
For more than 65 years, TransCanada has been developing and maintaining energy infrastructure, while handsomely rewarding shareholders.
And with a current dividend yield of 5.18%, it’s hard to find a safer income stream at these levels than this.
Since 2000, TransCanada stock has provided shareholders with a 8.37% compound annual growth rate (CAGR), while delivering yearly dividend increases, which has brought the dividend per share from $0.80 to $2.76 for CAGR of over 7% — strong, predictable growth.
And 95% of TransCanada’s EBITDA is from regulated or long-term contracted assets. It has above-average, visible growth and an infrastructure presence that should ensure strong growth well into the future.
As such, investors can expect continued dividend growth of 8-10% through to 2021.
TransCanada stock is down 13% since January 2017, as it too fell under the pressure of rising interest rates, but this company has continued to be a beacon of strength in the business and for investors.
Finally, in terms of market sentiment toward the stock, the recent approval of LNG Canada’s proposal to build the LNG plant is a positive in that it has resulted in the company moving forward on its Coastal GasLink natural gas pipeline. It will also have a positive effect on investor sentiment.
Final Thoughts
In closing, for investors looking for income and capital appreciation to drive their quest for financial independence, both of these stocks are low-risk ways to get there.
