The TSX features many companies that offer dividends, allowing investors to start a passive-income stream. However, a few high-quality ones are worth buying and holding for life as they provide a steady income for decades. Against this background, here are two Canadian stocks that are backed by fundamentally strong businesses, have consistently paid and increased their dividend for years, and maintain a sustainable payout ratio.
Furthermore, these dividend stocks offer high yields and visibility into future distributions, making them reliable investments for passive income.
Telus
Telus (Tsx:t) is among the reliable dividend stocks to buy and hold for the long term. The Canadian communications giant has a solid track record of rewarding its shareholders. Since 2004, the telecom company has distributed over $21 billion in dividends and raised its quarterly payouts 27 times since 2011.
Even in uncertain economic conditions, it has maintained its dividend-growth streak and recently raised its dividend by 7%. Currently, Telus stock offers a high yield of about 7.4%.
Telus’s dividend distributions are supported by its ability to consistently deliver steady earnings growth. The company is profitably growing its subscriber base and reducing customer churn, which supports its bottom line.
Telus’s continued investment in its broadband and wireless networks, including fibre and 5G infrastructure, will drive its customer base. Furthermore, it is also expanding its connected device subscriber base as demand for Internet of Things (IoT) solutions continues to increase. The communication giant’s focus on product innovation, sales channels expansion, and streamlining operations will contribute to reliable earnings growth, enabling the company to consistently pay and increase its dividend.
Telus’s diversified revenue streams and focus on cost reduction provide a solid foundation for delivering sustainable earnings growth. Moreover, as Telus’s earnings are likely to expand and capital spending is projected to decline, it will enable the company to consistently increase its future dividend. Telus aims to grow its dividend by 3-8% annually through 2028 while maintaining a sustainable payout ratio of 60-75% of free cash flow.
TC Energy
TC Energy (TSX:TRP) is another dividend stock that can generate consistent passive income for life. The energy infrastructure company operates an extensive network of natural gas pipelines, which witness high utilization and generate solid cash flow to support its payouts.
With a low-risk, highly contracted business model, TC Energy generates stable earnings across all market conditions. Furthermore, the majority of its earnings come from its rate-regulated assets or long-term take-or-pay contracts, enabling it to create low-risk earnings and maintain and grow its dividends.
The company has raised its dividend for 25 years. Thanks to its high-quality contractual arrangements, Telus could continue to grow its payouts in the future. TC Energy anticipates its dividend to increase by 3-5% annually over the coming years. Moreover, it offers a high yield of over 5%.
Its future payouts will likely be supported by its high-quality U.S. natural gas pipelines that operate under long-term take-or-pay contracts. Furthermore, the energy transition and higher power demand from data centres are expected to provide a solid foundation for future growth for the company. TC Energy’s strong project pipeline, focused on high-return opportunities, will continue to support earnings growth and drive reliable dividend payouts.