2023-05-09
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With no regular income, retirees are risk-averse while making investment decisions. So, they should invest in stocks that maintain a strong balance sheet, generate stable cash flows, and pay dividends at healthier rates. Accordingly, I am betting on these three dividend stocks with solid underlying businesses and an impressive record of raising dividends.
Enbridge
Enbridge (TSX:ENB) is an energy infrastructure company operating a pipeline network that transports oil and natural gas across North America. It also has a substantial presence in the renewable energy space. With approximately 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) underpinned by long-term agreements, the company’s cash flows are mostly predictable. Supported by these robust cash flows, ENB has paid dividends uninterruptedly for the last 68 years. Further, the company has raised its dividends for the previous 28 years, and has a yield currently at 6.69%.
Meanwhile, Enbridge is advancing with a $17 billion secured capital program. The company is expecting to put around $6.4 billion worth of projects into service in 2023 and 2024. Also, the pipeline operator could benefit from rising global energy demand and growing European exports. Management expects its adjusted EBITDA and EPS to grow by 4%–6% annually through 2025 and 5% afterward. So, the company is well-positioned to maintain its dividend growth in the coming years, thus making ENB an excellent buy.
Fortis
Fortis (TSX:FTS) is an energy infrastructure company, with around 93% of its assets involved in transmitting and distributing electricity and natural gas, serving about 3 million customers. Given its low-risk utility business, the company generates stable cash flows irrespective of the broader economy, thus allowing it to raise dividends consistently for 49 years. FTS currently pays a quarterly dividend of $0.565/share, with its forward yield at 3.69%.
Meanwhile, Fortis management has committed to invest around $22.3 billion from $2023 to 2027, earmarking $4.3 billion for this year. Supported by these investments, the company expects to grow its rate base at a CAGR (compounded annual growth rate) of 6.2%, thus boosting its cash flows. As a result, management hopes to raise its dividend by 4–6% through 2027. So, I believe Fortis would be an ideal buy for retirees.
Telus
Telecommunication companies are reliable defensive stocks to have in your portfolios amid rising demand for their services in this digitally connected world. So, I am picking Telus (TSX:T) as my final pick. T has grown its dividend consistently for the previous 19 years, and its yield is currently at an impressive 5.26%.
Meanwhile, Telus expects to make capital investments of $2.6 billion this year, expanding its 5G and high-speed broadband services. Supported by these initiatives and growing demand, the company’s management has projected its revenue and adjusted EBITDA to grow in double digits this year. Besides, Telus is optimistic about generating cash flows of $2 billion, thus making its payouts safe. Notably, the company’s valuation also looks attractive, with its NTM (next 12 months) price-to-sales at 1.9, making it an attractive buy.