Investors seeking passive income could consider investing in the shares of dividend-paying companies. Moreover, for a more dependable source of passive income, one could consider allocating their funds to shares of Dividend Aristocrats. These are companies boasting a proven track record of consistently increasing dividends over a significant number of years, typically five years or more. This history reflects financial stability and a commitment to providing returns to shareholders.
Additionally, Canadians can take advantage of the Tax-Free Savings Account (TFSA) to invest in Dividend Aristocrats and generate tax-free passive income. Against this backdrop, here are three fundamentally strong Dividend Aristocrats that can help you earn $1,680/year in passive income.
Enbridge
Enbridge (TSX:ENB) is a top passive-income stock for its ability to increase its dividend in all market conditions. The company transports oil and gas and boasts a dividend-growth history of 29 years. Recently, Enbridge raised its dividend by 3.1%, which equates to an annualized dividend of $3.66 per share. This translates into a compelling yield of 7.7% (based on its closing price of $47.36 on December 15).
Besides high yield, Enbridge’s target payout ratio of 60-70% of distributable cash flow (DCF) is sustainable in the long term. This suggests that investors can rely on its payouts.
Looking ahead, Enbridge’s diversified revenue sources, multi-billion-dollar secured projects, and consistent investments in conventional and renewable energy assets will drive its DCF per share and its dividend payouts. Moreover, its strategic acquisitions will likely accelerate its growth and support future payouts.
Canadian Natural Resources
Like Enbridge, shares of Canadian Natural Resources (TSX:CNQ) are another reliable bet to earn a steady passive income. This oil and natural gas company is famous for its high dividend growth. For instance, Canadian Natural Resources recently increased its quarterly dividend to $1 per share, reflecting a yield of 4.7%. Moreover, it has now raised its dividend for 24 consecutive years.
The company’s financial position remains strong, with a low debt-to-adjusted funds flow ratio of approximately 0.7. Moreover, the company has high-quality, long-life assets with high-value reserves. This indicates that it remains well positioned to enhance its shareholders’ returns through increased dividend payments.
Overall, its diversified asset base, cost-control measures, and strong balance sheet allow it to generate substantial cash flows to support growth opportunities and dividend payouts.
Fortis
With a stellar track record of growing its dividend for 50 consecutive years, Fortis (TSX:FTS) stock is a worry-free passive-income stock. This regulated electric utility company generates predictable cash flows that support its dividend payments. Moreover, its growing rate base suggests that Fortis will grow its dividend at a decent pace in the coming years.
Fortis expects its rate base to grow by about 6.3% annually through 2028. Moreover, it forecasts its annual dividend to grow by 4-6% per year during the same period.
In summary, Fortis’s low-risk business, steady cash flows, and visibility of future dividend growth make it an excellent passive-income stock. The company pays a quarterly dividend of $0.59 a share, translating into a yield of about 4.3%.
Bottom line
On average, these reliable income stocks offer a dividend yield of 5.6%. An investment of $30,000 distributed equally in these Dividend Aristocrats will help you earn a tax-free income of approximately $1,680/year.
