Boost Your After-Tax Income With 2 Dividend Aristocrats

Your after-tax income will continue to rise the longer you are invested in Canadian Utilities Ltd. (TSX:CU) and Fortis Inc. (TSX:FTS)(NYSE:FTS), which are legendary Dividend Aristocrats on the TSX.

| More on:

Boosting after-tax income is becoming relevant these days. Canadians are beginning to feel the effects of withholding taxes and reduced disposable income. The rising cost of living expenses is also taking its toll on employees or regular income earners.

When it’s difficult to make ends meet from month to month, you need to augment your active income with passive income. If you have enough savings, consider investing the money in the so-called Dividend Aristocrats. You’ll have the opportunity to grow your after-tax income to supplement your net pay.

The ideal investment choices

There are quite a few publicly listed companies on the TSX that are included in the elite list of Dividend Aristocrats. Canadian Utilities (TSX:CU) and Fortis (TSX:FTS)(NYSE:FTS) are tops on my list. You’ll have the power to generate the badly needed extra income to fortify your after-tax income.

Canadian Utilities is under the umbrella of a vaunted holding company Atco and is one of the largest utilities in Canada. The $21.64 billion company is heavily invested in electricity, pipelines and liquids, and retail energy. The central operations are in Canada but actively operating in Australia and Latin America.

The company is eyeing other international markets that would create an expansive global footprint. The markets in the U.S., Mexico, and South America are the next targets. Expect the company’s extensive network of 87,000 km electrical power lines, 64,500 km pipelines, and 21 global generating plants to increase.

Canadian Utilities’s record of 47 straight years of common shares dividend increases makes the stock a genuine Dividend Aristocrat. The current dividend yield of 4.6% is an above-average yield, which is high enough to boost your after-tax income.

I won’t think twice paying more to own shares of Fortis. The $22.72 billion electric and gas utility company pays a lower but decent dividend yield of 3.43%. The company never missed a beat in raising dividends annually for 41 consecutive years. That streak won’t be halted in the near-term and definitely not in the long term.

Fortis benefits from federal tax credits, and therefore the company’s after-tax income is boosted, too. This could mean further dividend growth should management decide to be more generous.

In any case, income is assured for years on end. As a regulated utility company that distributes natural gas and electricity, Fortis earns commensurate to investments in power lines, gas metres, and other assets.

The capital projects in the pipeline can translate into a per-share profit increase of 5-8% annually. By the looks of it, there will be more elbow room to declare higher dividend payouts in the future.

The stock prices of Canadian Utilities and Fortis could increase moderately but not more than 10%. However, you’re assured that the source of your extra income will never run dry. These two dividend champions are the one-two punch when you speak of Canadian utilities that humbly hold the longest track record of annual dividend increases.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

A worker uses a laptop inside a restaurant.
Dividend Stocks

Here’s the Average RRSP Balance at Age 34 for Canadians

The RRSP is a perfect tool for creating retirement income, but only if you contribute! Here's how to catch up.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

1 Magnificent Canadian Dividend Stock Down 32% to Buy and Hold Forever

Despite growing debt and a significant payout ratio, is BCE still one of the best Canadian dividend stocks to buy…

Read more »

Woman in private jet airplane
Dividend Stocks

3 Secrets of TFSA Millionaires

The TFSA is a strong way to reach that millionaire status, but only if you make sure to follow the…

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

2 TFSA Stocks to Buy Right Now With $7,000

The TFSA is the perfect vehicle for creating long-term growth, and keeping up with those investments can create immense income!

Read more »

bulb idea thinking
Dividend Stocks

The Smartest Dividend Stocks to Buy With $1,000 Right Now

Northwest Healthcare Properties is one of two dividend stocks that are affordable and high yielding, with a good risk/return profile.

Read more »

Forklift in a warehouse
Dividend Stocks

The Smartest Dividend Stocks to Buy With $100 Right Now

Dividend stocks are key for any portfolio, but only if those dividends are consistent! That's what makes these three top…

Read more »

Man data analyze
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $400 Per Month?

Here's some passive-income math to get your journey to financial freedom started.

Read more »

Asset Management
Dividend Stocks

A 10% Dividend Yield Today! But Here’s Why I’m Buying This TSX Stock for the Long Term 

A 10% dividend yield stock has risks in the short term but growth in the long term. This stock is…

Read more »