After a tough start to this month, the Canadian equity markets have rebounded strongly over the last few days due to easing recession fears. Amid renewed investors’ confidence, the S&P/TSX Composite Index is up 9.9% this year. Meanwhile, the following three stocks, which pay dividends at a healthier rate, have outperformed the broader equity markets. These three stocks offer excellent buying opportunities, given their solid underlying businesses, consistent dividend increases, and healthy growth prospects.
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Fortis
Fortis (TSX:FTS) operates 10 regulated utility assets across the United States, Canada, and the Caribbean, meeting the electric and natural gas needs of 3.5 million customers. The company operates a capital-intensive business. Falling interest rates could lower its interest expenses, thus improving its profitability. So, the company has witnessed healthy buying over the last couple of weeks, with its stock price rising 12.5% higher this year.
Given its regulated asset base, Fortis generates stable cash flows, thus allowing it to raise dividends for 50 consecutive years. It currently pays $0.59/share of quarterly dividends, with its forward yield at 4%. Moreover, the company has adopted a $25 billion five-year capital investment plan, which it plans to invest from 2024 to 2028. These investments would expand its rate base at an annualized rate of 6.3% through 2028, thus supporting its financial growth in the coming years. Amid its growth prospects, the management is confident of raising its dividends by 4-6% annually through 2028.
Considering its consistent dividend growth, regulated asset base, and expansion initiatives, I believe Fortis would be an excellent addition to your portfolio.
Enbridge
Second on my list would be Enbridge (TSX:ENB), which is trading 17.7% higher this year amid solid second-quarter performance and falling interest rates. During the June-ending quarter, the company generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $4.3 billion, representing an increase of 8% from the previous year’s quarter. Besides, its distributable cash flows increased by 3% to $2.9 billion.
The midstream energy company has completed the acquisition of two natural gas utility assets in the United States and expects to close the third deal this quarter. Further, it continues strengthening its midstream, renewable, and utility assets through a $24 billion secured capital program. These growth initiatives could boost its financials in the coming years.
Meanwhile, Enbridge has been paying dividends uninterruptedly for 69 years and has raised its dividends for the previous 29 years at an annualized rate above 10%. It currently pays a quarterly dividend of $0.915/share, with its forward yield at 7%. So, Enbridge would be an enticing buy right now.
Canadian Natural Resources
Another top dividend stock that has outperformed the broader equity markets is Canadian Natural Resources (TSX:CNQ). The oil and natural gas producer is up 14.8% this year amid elevated oil prices and solid quarterly performances. In the June-ending quarter, the company’s adjusted net income from operations and adjusted fund flows grew by 50.6% and 31.8%, respectively. Increased production, effective and efficient operations, and higher realized prices drove its financials.
Meanwhile, CNQ has planned to invest around $5.4 billion this year, with $2.5 billion in conventional exploration and production and $2.9 billion in thermal and oil sands mining and upgrading. These investments could continue to drive its production. Further, analysts are projecting oil prices to remain elevated in the near-to-medium term amid growing demand, geopolitical tension, and supply concerns.
Moreover, with its debt levels falling below its guidance of $10 billion, CNQ will return 100% of its free cash flows to its shareholders, making its future dividend payouts safer. The company has raised its dividends at a CAGR of 21% for the previous 24 years, while its forward yield stands at 4.3%.
