Owning dividend stocks can help retirees boost their retirement income. Thankfully, the TSX has several fundamentally strong, dividend-paying stocks that retirees can rely upon to generate reliable passive income. While several Canadian stocks have been paying and growing their dividends, here are my three top picks that can help retirees earn worry-free passive income.
Bank of Montreal
Retirees could consider adding shares of the top Canadian banks to earn a steady income. It’s worth highlighting that the large Canadian banks have been paying dividends for more than 100 years, making them a dependable investment. Among the top bank stocks, Bank of Montreal (TSX:BMO), with the longest dividend payment history, is an attractive play.
It’s worth highlighting that this banking giant has paid a dividend for 194 years. Further, its dividend has grown at a CAGR (compound annual growth rate) of 5% in the last 15 years. Its ability to consistently generate solid earnings and a conservative payout ratio supports its higher dividend payments. Meanwhile, it offers a reliable 4.9%.
Looking ahead, Bank of Montreal’s diversified revenue base, growing loan and deposits, stable credit performance, and focus on improving its operating efficiency will likely drive its earnings and dividend payments.
Fortis
From banks, let’s move toward utilities. Notably, utilities are famous for their solid dividend payouts. Their low-risk and regulated business generates predictable cash flows, allowing them to enhance their shareholders’ returns through regular dividend payments in all market conditions. Among utilities, retirees could easily rely on Fortis (TSX:FTS).
Fortis, with its 10 regulated electric utility businesses and stable cash flows, is a top stock to earn a steady income. The company earns most of its earnings through regulated utility assets, implying that its payouts are safe. Moreover, its growing rate base enables it to consistently increase its dividend payments.
Thanks to its low-risk business model and predictable cash flows, Fortis increased its dividend for 49 consecutive years. Further, Fortis expects to grow its dividend at a CAGR of 4-6% through 2027.
Its $22.3 billion capital plan will help expand its rate base at a CAGR of more than 6% through 2027. This will drive revenue and earnings and support higher dividend payments. At the same time, energy transition opportunities bode well for future growth. Fortis stock offers a decent yield of 4%.
Enbridge
Enbridge (TSX:ENB) is the final stock on this list. Like Fortis, this energy infrastructure company is famous for its consistent dividend payment and growth. The company’s highly diversified income sources, contracts to reduce price and volume risk, and high asset utilization rate have led it to enhance its shareholders’ returns via higher payouts.
It has paid a dividend for 68 years. Further, its dividend grew at a CAGR of 10% in the last 28 years. Investors should note that Enbridge uninterruptedly paid and increased its dividend, even amid the pandemic, when most energy companies paused or reduced their payouts. This shows the resiliency of its business.
Enbridge’s continued investments in conventional and renewable assets positions it well to capitalize on the long-term energy demand. Further, its inflation-protected earnings, low capital-intensity growth projects, and power-purchase agreements augur well for future growth. Retirees can earn a high yield of over 7% by investing in ENB stock near the current levels.
