Despite rate cuts, the Canadian equity markets are under pressure, with the S&P/TSX Composite Index falling 1.7% this month. Given the uncertainty, investors should strengthen their portfolios with quality dividend stocks. Here are my three top picks you could buy right now.
Enbridge
Enbridge (TSX:ENB) has been paying dividends uninterruptedly for the previous 69 years while raising the same at an annualized rate of over 10% for the last 29 years. With a quarterly dividend of $0.915/share, its annualized payout stands at $3.66 per share, while its forward yield is 7.50%. Its long-term contracts and utility-like business shield around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from commodity price fluctuations, thus generating stable cash flows. Besides, around 80% of its adjusted EBITDA is inflation-indexed, protecting against rising prices.
After acquiring two natural gas utility assets in the United States, the midstream energy company is working on acquiring another asset, making it North America’s largest natural gas utility company. Besides, the company is progressing with its $25 billion secured capital program, which could drive 3% annual growth until 2028. Also, Enbridge is working on optimization and cost-saving initiatives, which could contribute 1 to 2% of additional yearly growth. Given these initiatives, I believe Enbridge is well-equipped to continue its dividend growth.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is another stock that has raised dividends consistently for the previous 24 years at an annualized rate of 21%. Its long-life asset base and diversified cash flows provide stability to its financials, thus allowing it to raise its dividends consistently. Over the last five years, the company has returned above 90% at an annualized rate of 13.7%. Higher oil prices and solid performance have driven its stock price.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and its allies announced last week that they would prolong most of their production cuts deep into the next year. Besides, analysts are projecting that the demand for fuel will rise in the summer and expect oil prices to remain on the higher side in the near-to-medium term. Higher oil prices could benefit oil-producing companies, such as CNQ.
Further, CNQ plans to drill around 298 conventional E&P (exploration and production) wells this year and has allocated $5.4 billion for capital investment. These initiatives could increase its production, thus driving its financials. So, I believe CNQ’s future payouts will be safer, making it an ideal buy for income-seeking investors.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX:PZA) is another excellent dividend stock to buy right now due to its consistent cash flows and high dividend yield. It has franchised its Pizza Pizza and Pizza 73 brand restaurants and collects royalties based on their sales. So, its financials are less susceptible to commodity and wage inflation, thus allowing it to reward its shareholders with healthy dividends. The company currently pays a monthly dividend of $0.0775/share, translating into an annualized payout of $0.93/share and a forward yield of 7%.
Meanwhile, PZA is constructing new restaurants and expects to increase its traditional restaurant count by 3 to 4% this year. Further, its continued menu innovations, promotional activities, and restaurant renovation program could boost its same-store sales, driving its financials. Besides, it trades at an attractive NTM (next 12 months) price-to-sales multiple of 0.7, making it an attractive buy.
