How to Earn Safe Dividends With Just $10,000

Investing in the equity market carries risks, implying no stock is 100% safe. However, certain stocks are relatively stable and less volatile, offering more security to your investment portfolio. Thus, investors looking for safe dividends could consider investing in shares of companies with lower volatility. 

Most importantly, one should focus on companies capable of maintaining and even increasing payouts regardless of market conditions. Further, investors should assess management’s commitment to returning cash to shareholders and the sustainability of payouts. 

Fortunately, the TSX has several such fundamentally strong stocks sporting a solid track record of dividend payment and growth for decades. Further, these companies have well-covered payouts and offer decent yields. With this background, let’s look at three Canadian stocks where you can invest $10,000 to generate relatively safe dividends.

Canadian Utilities 

Speaking of safe dividends, investors could consider Canadian Utilities (TSX:CU). The energy infrastructure company boasts an impressive track record of dividend increases spanning 51 consecutive years, the longest among Canadian enterprises. The company’s solid dividend-growth history shows the resilience of its earnings base and management’s commitment to returning cash to its shareholders. These attributes make it a top choice for investors seeking reliable dividends.

Canadian Utilities’s highly contracted and regulated business generates high-quality earnings in all market conditions, providing a solid foundation for continued dividend growth. Notably, Canadian Utilities currently offers a quarterly dividend of $0.453 per share, translating into a compelling yield of about 5.8% based on the closing price of $30.69 on March 27.

Looking ahead, Canadian Utilities’s ongoing investments in regulated utility assets are likely to expand its rate base and, in turn, earnings. Additionally, its focus on commercially secured energy infrastructure capital growth projects augurs well for growth. Overall, its contracted and regulated earnings base positions it well to pay and increase its distributions. 

Fortis 

Like Canadian Utilities, Fortis (TSX:FTS) is famous for its stellar dividend distribution and growth history. This electric utility company has uninterruptedly increased its dividends for 50 years. Its predictable and growing cash flows, investments in renewable energy sources, and expansion of its rate base enable Fortis to increase its earnings and dividend payments regardless of economic situation. 

Fortis currently pays a quarterly dividend of $0.59 a share, reflecting a well-protected yield of 4.4%

Fortis is directing its investments toward expanding its rate base, which will drive its future earnings and distributions. Looking ahead, Fortis projects its rate base to grow at a compound annual growth rate (or CAGR) of 6.3% in the medium term (through 2028). At the same time, Fortis expects its dividend to grow at a CAGR of 4-6% through 2028. 

Enbridge

Enbridge (TSX:ENB) is a top choice for investors seeking worry-free dividend income. The company’s diverse income streams, high asset utilization, power-purchase agreements, and contractual arrangements drive its distributable cash flow (DCF) and earnings in all market conditions. This enables the company to return more cash to its shareholders via increased dividend payments. Enbridge has paid dividends for over 69 years and increased it for 29 years. 

It currently pays a quarterly dividend of $0.915 per share, reflecting a yield of 7.5%. 

Enbridge expects its DCF and earnings per share to grow at a CAGR of 5% in the long term, positioning it well to increase its dividend at a mid-single-digit rate. The company’s growing conventional and renewable asset base and multi-billion-dollar capital projects will likely drive its cash flows and support its payouts. 

Bottom line

Canadian Utilities, Fortis, and Enbridge’s dividend-growth history, growing earnings base, and well-protected yield make them top stocks to earn safe passive income. By distributing $10,000 equally in each of these stocks, investors can earn a quarterly income of about $148.