Investing in dividend stocks of blue-chip companies is a smart strategy for generating steady passive income and decent capital gains over time. These dividend-paying companies have large market caps, fundamentally sound businesses, and a growing earnings base to support their growth and payouts.
With this background, here are the three blue-chip dividend stocks that every Canadian should own for worry-free passive income.
Blue-chip dividend stock #1
Speaking of Canadian blue-chip dividend stocks, Fortis (TSX:FTS) tops my mind. This Canadian electric utility company has a defensive business supported by its diversified portfolio of regulated assets. This model enables it to generate low-risk earnings and cash flows, supporting higher dividend payouts.
What stands out is that Fortis has raised its dividend distributions for 51 consecutive years, making it a Dividend King and one of Canada’s most reliable dividend-growth stocks. Besides offering worry-free income, it offers a decent yield of 3.9%.
Fortis is well-positioned to continue raising its payouts, supported by its expanding rate base and capital investments. Moreover, Fortis’s solid transmission investment pipeline and energy transition opportunities bode well for future growth.
Fortis is investing in infrastructure to ensure sustainable growth. Its $26 billion capital expenditure program is expected to boost its rate base at a compound annual growth rate (CAGR) of 6.5% through 2029. This expanding rate base will drive future earnings growth, which will support consistent dividend hikes. Management plans to grow dividends by 4-6% annually through 2029.
Blue-chip dividend stock #2
Enbridge (TSX:ENB) is another top blue-chip stock for Canadians. This energy infrastructure company owns extensive midstream assets and a strong liquid pipeline network. Its assets witness a high utilization rate, which supports its distributable cash flows and earnings growth. Further, its regulated natural gas utility business generates predictable cash flows.
Thanks to its resilient cash flows, Enbridge has regularly paid dividends for seven decades and raised it for 30 consecutive years. Further, it offers an attractive yield of about 5.8%.
Enbridge’s high-quality, low-risk asset base, long-term contracts, regulated tolling frameworks, and higher utilization rate will continue to drive sustainable growth. Further, its investments in utility-like projects and its growing portfolio of renewable energy assets position it well to capitalize on energy transition opportunities. Moreover, its focus on strategic acquisitions and multi-billion-dollar capital projects will boost its revenues and cash flows, driving its dividends and share price.
Blue-chip dividend stock #3
Large Canadian bank stocks like Toronto-Dominion Bank (TSX:TD) are also reliable investments that generate steady passive income. This blue-chip dividend stock has been paying regular dividends for over a century and growing at a solid pace.
For instance, this financial services giant has distributed dividends for 167 consecutive years. Further, its dividend increased at a CAGR of 10%, the highest growth rate among its peers. Toronto-Dominion Bank offers a dividend yield of 4.8% and a sustainable payout ratio of 40-50%.
The bank’s steady earnings and conservative payout ratio support its dividend growth. Further, it will likely benefit from its diversified revenue stream, expansion of loans and deposit base, and operating efficiency. Also, its accretive acquisitions will accelerate its growth, supporting higher payouts.
