Investors planning to start a growing passive income stream could consider investing in the shares of dividend-paying companies with a strong track record of paying and growing their dividends in all market conditions. Further, these companies should have well-established businesses and a growing earnings base to support their future payouts.
Against this backdrop, let’s look at three fundamentally strong dividend stocks that can generate a growing passive income stream.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is one of the top stocks to start a passive income stream that will grow with you. With a stellar track record of dividend growth, this oil and natural gas company is a dependable bet. Recently, it raised its quarterly dividend to $1 per share, resulting in a yield exceeding 4.7% based on the January 18 closing price of $84.49. Notably, Canadian Natural Resources has consistently elevated its dividend for 24 consecutive years.
What sets Canadian Natural Resources apart is its remarkable dividend growth rate. The company has increased its dividend at a compound annual growth rate (CAGR) of 21% in the last 24 years.
Looking ahead, its solid asset base, high-value reserves, cost control strategies, and sound financial standing position it favourably for generating substantial earnings and cash flows. This, in turn, will empower Canadian Natural Resources to boost shareholder value through increased dividend payments.
Enbridge
Enbridge (TSX:ENB) is undoubtedly a top-quality dividend stock, reflected in its impressive dividend payment history and ability to increase the same regardless of the market conditions. The company transports oil and gas and has a growing portfolio of renewables. It remains committed to enhancing shareholder value through consistent dividend payments and offers a compelling yield of 7.6%.
It’s worth highlighting that Enbridge has consistently raised its dividend for 29 consecutive years. Moreover, its dividend sports a 29-year CAGR of 10%, the highest among its peers. The company also maintained and increased its dividend during the pandemic when several energy giants either reduced or suspended their payouts.
Enbridge’s highly diversified income streams, high asset utilization rate, power-purchase agreements, and cost-of-service tolling arrangements position it well to grow its distributable cash flows (DCF) and offer higher dividend payments. Furthermore, its multi-billion secured capital projects and strategic acquisitions will likely drive its earnings and payouts. Enbridge has a target dividend payout ratio of 60 to 70% of DCF, which is sustainable.
Fortis
Investors looking to create a growing passive income portfolio shouldn’t miss Fortis (TSX:FTS) stock. This low-volatility stock is famous for paying and growing its dividend for decades. To be precise, Fortis, which operates a low-risk utility business, has raised its dividend for 50 consecutive years. Moreover, as Fortis earns almost all of its earnings through regulated assets, its payouts remain well protected.
The company plans to expand its rate base in the future, which will drive its earnings and dividend payments. For instance, Fortis expects its rate base to increase at a CAGR of 6.3% and reach $49.4 billion by 2028. It expects to grow its dividend by 4 to 6% annually during the same period.
Fortis offers a yield of 4.4% near the current price levels, which is well protected.
