A balanced portfolio should have a substantial percentage of dividend stocks. Given their regular payouts and solid cash flows, these companies are less vulnerable to market volatility, thus strengthening portfolios. Moreover, dividend stocks have historically outperformed the broader markets. Against this backdrop, here are three top dividend stocks you can double up on, given their solid underlying businesses, consistent dividend growth, and healthy growth prospects.
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TC Energy
TC Energy (TSX:TRP) operates pipeline networks, storage facilities, and power-generation plants in Canada, the United States, and Mexico. It earns around 77% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from regulated assets and 20% from long-term, take-or-pay contracts. So, it generates stable and predictable cash flows irrespective of the broader market conditions, thus allowing it to raise its dividends consistently. The company has raised its dividends for 24 years and currently offers an attractive dividend yield of 5.61%.
Moreover, TC Energy is expanding its asset base through a multi-year secured capital program, which could boost its financials in the coming years. Also, it is focusing on improving its capital efficiency and cost optimizations across the portfolio, which could deliver cost savings of around $2.5 billion between 2024 and 2027. Amid these growth initiatives, TC Energy’s management projects its adjusted EBITDA to grow at an annualized rate of 5-7% through 2027. The company also hopes to raise its dividends at 3-5% annually in the coming years, thus making it an ideal buy.
Fortis
Fortis (TSX:FTS) has witnessed healthy buying over the last six months, with its stock price rising by 19.5%. Interest rate cuts and solid financials have boosted its stock price. Meanwhile, the utility company has consistently rewarded its shareholders by raising its dividends for 51 years. Its low-risk, regulated transmission and distribution business makes its financials less susceptible to market volatility, thus allowing it to increase its dividends consistently. It currently offers a forward dividend yield of 3.95%.
Moreover, Fortis is expanding its rate base with a capital expenditure of $5.2 billion this year. Also, it has planned to invest around $26 billion from 2025 to 2029, growing its rate base at 6.5% CAGR (compound annual growth rate) to $53 billion by the end of 2029. The company hopes to fund 59% of these investments from the cash generated from its operations and 11% from DRIP (dividend-reinvestment plans). So, these investments would not drive its debt levels substantially. Meanwhile, these expansion initiatives could boost its financials and cash flows, facilitating future dividend growth. The company’s management hopes to raise dividends at an annualized rate of 4-6% through 2029. Considering all these factors, I believe Fortis would be an excellent buy.
Canadian Natural Resources
Another dividend stock I am bullish on is Canadian Natural Resources (TSX:CNQ), which has raised its dividends for the previous 25 years at an annualized rate of 21%. The oil and natural gas-producing company operates a well-diversified, balanced asset base. Given its low-risk, high-value reserves, low capital reinvestment requirement, and effective and efficient operations, the company’s cash flows have been solid, thus allowing it to raise its dividends consistently. Meanwhile, it currently offers a quarterly dividend of $0.5625/share, translating into a forward dividend yield of 4.36% as of the December 3rd closing price.
CNQ had drilled 207 crude oil wells and 64 natural gas wells in the first three quarters of this year. With natural gas prices on the lower side, the company has been focusing on heavy crude oil assets. These initiatives could boost its production, thus supporting its financial and dividend growth. Its valuation also looks attractive, with the company trading 13.8 times analysts’ projected earnings for the next four quarters.
