Canadian investors have enjoyed a stellar year, with the S&P/TSX Composite Index rising 21.2% year-to-date. Interest rate cuts, easing inflation, and strong quarterly performances have driven the equity markets higher. However, the November Producer Price Index in the United States rose 0.4% against analysts’ expectations of 0.2%. A rebound in inflation, geopolitical tensions, and tariff threats are causes of concern.
Given the uncertain outlook, investors can strengthen their portfolios by adding quality dividend stocks. Due to their consistent payouts, these companies are less susceptible to market volatility. They also allow you to earn a stable passive income. Against his backdrop, here are my two top picks.
Source: Getty Images
Enbridge
Given its excellent record of paying and raising dividends, I have chosen Enbridge (TSX:ENB) as my first choice. The diversified energy company operates pipeline networks transporting oil and natural gas across North America. It also has an extensive presence in the natural gas utility and renewable energy sectors. With 98% of its cash flows underpinned by long-term contracts, the company has generated stable cash flows irrespective of broader market conditions, thus allowing it to raise its dividends for 29 years at an annualized rate of 10%. Besides, it also offers a juicy forward dividend yield of 6.3%.
Moreover, Enbridge has strengthened its natural gas utility business by acquiring three facilities in the United States, making it the largest utility company in North America. Further, the company is continuing its $27 billion secured capital program and expects to put $5 billion of projects into service this year. Amid these growth initiatives, the company’s management projects its EBITDA (earnings before interest, tax, depreciation, and amortization) to grow at 7–9% through 2026, while its DCF (discounted cash flows) could increase at a CAGR of 3%. After 2026, the company expects its EBITDA and DCF to grow at an annualized rate of 5%.
Besides, Enbridge’s financial position looks healthy, with its liquidity at $17.1 billion. The company’s valuation looks attractive, with its NTM (next 12 months) price-to-earnings multiple at 20. Considering all these factors, I believe Enbridge would be a worthy buy in this uncertain outlook.
Fortis
Another dividend stock I am bullish on is Fortis (TSX:FTS), a highly regulated utility company serving 3.5 million customers. The company’s financials are less susceptible to market volatility, with 99% regulated assets and 93% involved in the low-risk transmission and distribution business. Thus, it generates stable and predictable cash flows, allowing it to raise dividends for 51 years. Also, FTS stock offers a forward dividend yield of 4.1%.
Fortis operates a highly capital-intensive business. With the central banks of the United States and Canada slashing their benchmark interest rates, the company has been witnessing healthy buying since July, with its stock price rising by 13.3%.
Moreover, Fortis is expanding its rate base and has invested $3.6 billion in the first three quarters. It is on track to invest $5.2 billion this year. Besides, the company has also planned to invest around $26 billion from 2025 to 2029, expanding its rate base at an annualized rate of 6.5%. The utility expects to meet around 70% of the funding from the cash generated from its operations and DRIP (dividend-reinvestment plans). So, these investments would not increase its debt levels substantially. Considering its healthy growth prospects and stable cash flows, I expect Fortis to continue rewarding its shareholders with consistent dividend growth.
