Investors looking to start a passive income stream can rely on dividend-paying stocks. However, to create a bulletproof passive income portfolio, one must focus on shares of companies with well-established businesses and strong fundamentals. Moreover, investors should prefer companies with a growing earnings base and solid track record of dividend payments and growth.
Further, as dividend payments are not guaranteed, investors must diversify their passive income to eliminate future disappointments.
Against this backdrop, Iâll focus on three Canadian stocks that can help you create a bulletproof passive income portfolio with just $10,000.
Fortis (TSX:FTS) is a must-have stock to create a bulletproof passive income portfolio. The company generates predictable and growing cash flows by operating a low-risk, regulated electric utility business. Moreover, Fortis has an excellent track record of dividend payments and growth (increasing the dividend for 49 consecutive years). This stability makes Fortis a solid stock to earn worry-free income regardless of market conditions.
It owns diversified regulated utility assets that account for all of its earnings, implying that its payouts are well covered and can be easily relied upon. Fortis is focusing on growing its rate base, which will drive future earnings and dividend payments. The companyâs $22.3 billion capital plan is on track and will enable it to grow its rate base by 6% annually through 2027. Fortisâ low-risk rate base growth will allow it to enhance shareholdersâ returns through higher dividend payments.
Fortis expects to grow its dividend by 4-6% annually through 2027. FTS stock offers a well-protected yield of 4.2% (based on its closing price on September 1).
My next pick is Enbridge (TSX:ENB). This energy infrastructure company has a strong history of paying and growing its dividend in all market conditions. For instance, Enbridge has been paying dividends for over 68 years. Moreover, its dividend has a compound annual growth rate, or CAGR, of 10% in the last 28 years.
Enbridge transports oil and gas and has a highly diversified revenue base. It also operates a regulated natural gas utility business and has ownership interests in renewable power businesses. The companyâs diversified income stream, high asset utilization rate, and long-term contracts enable it to consistently generate strong DCF (distributable cash flow) that supports its dividend payouts. In addition, power purchase agreements, low-risk commercial arrangements, and regulated cost-of-service tolling frameworks add stability to its cash flows.Â
Enbridgeâs ongoing investments in conventional and low-carbon energy assets, multi-billion-dollar secured capital projects, and new assets placed into service will likely support its growth and future dividend payments. ENB is a dependable income stock with a compelling yield of 7.4%.
Iâll wrap up withÂ Toronto-Dominion BankÂ (TSX:TD). Impressively, this financial services giant has been paying dividends for over 166 years. Dividends grew at a CAGR of about 11% in the last 25 years, making it an excellent investment to start a growing passive income stream.Â
A growing earnings base supports its dividend payouts. The bank’s diversified revenues, high-quality assets, strong balance sheet, and improving efficiency enable it to deliver strong earnings that support its payouts.Â
Looking ahead, its growing loans and deposit base, strong credit quality, and savings efficiency will cushion its earnings. Moreover, its payout ratio of 40-50% is low and sustainable in the long term. Investors can earn a reliable yield of 4.6% by investing in Toronto Dominion Bank stock.
Investors can create a bulletproof passive income portfolio with these three dependable dividend stocks. The table below shows that an investment of $10,000 distributed equally into these three stocks can help you earn a worry-free passive income of $134.63 quarterly.
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* Returns as of 8/16/23
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