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After delivering 7.3% returns in the fourth quarter, the S&P/TSX Composite Index has maintained its uptrend, rising 2.7% year to date. The solid quarterly performances from prominent companies, signs of easing inflation, and optimism surrounding interest rate cuts have improved investors’ confidence, driving the equity markets higher.
However, economists are predicting a global slowdown this year due to the impact of the monetary tightening initiatives. So, the equity markets could be volatile in the near term. Given the uncertain outlook, investors can buy quality TSX dividend stocks to earn a stable passive income while strengthening their portfolios. Meanwhile, here are my three top picks.
Enbridge
Enbridge (TSX:ENB) operates a highly contracted midstream energy business, with around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) generated from regulated assets or long-term contracts. Around 80% of its adjusted EBITDA is inflation-indexed, thus shielding its financials against rising prices. So, the Calgary-based energy company generates stable and predictable cash flows, allowing it to raise its dividend consistently. It has raised its quarterly dividend for 29 consecutive years and currently offers a healthy dividend yield of 7.76%.
Besides, Enbridge is progressing with its $24 billion secured capital program and expects to put $4 billion of projects into service annually this year and next. It is also working on completing the acquisition of three natural gas utility assets in the United States, which could strengthen its financials amid increased contributions from high-quality and low-risk utility businesses. The company’s financial position looks healthy, with its net debt-to-EBITDA ratio at 4.1. It also ended 2023 with a liquidity of $23 billion. So, I believe the company’s future dividend payouts are safe, making it an ideal buy.
BCE
Another high-yielding dividend stock I am bullish on would be BCE (TSX:BCE), which has increased its dividends for 16 consecutive years and offers a forward yield of 8.11%. Rising interest rates and unfavourable regulatory decisions from the federal government and CTRC (Canadian Radio-television and Telecommunications Commission) have weighed down the company’s stock price.
However, the demand for telecommunication services is rising amid digitization. Meanwhile, BCE is expanding its 5G and broadband infrastructure to expand its customer base and drive its financials. Further, telecom companies enjoy stable cash flows due to their recurring revenue streams. Also, high initial investments and regulatory approvals will deter new entrants, thus allowing existing players to enjoy their market share. So, I believe BCE would be an excellent buy right now.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS), which has been paying dividends since 1833, is my final pick. Last week, the Toronto-based bank posted solid first-quarter earnings for fiscal 2024, which ended on January 31. Its net income rose 25% during the quarter amid revenue growth, margin expansion, and disciplined cost structure.
Besides, the common equity tier-one capital ratio increased from 11.5% in the previous year’s quarter to 12.9%, which is encouraging. Its liquidity coverage ratio improved year over year to 132%, lowering its reliance on external funding sources. Over the last six quarters, the company has built $1.1 billion in cumulative allowances for credit losses, representing a healthy coverage level.
Besides, BNS focuses on disciplined capital allocation, strengthening its balance sheet, growing deposits, and building strong client relationships to drive profitability. Given its healthy financials, growth initiatives, and solid track record of dividend growth, I believe BNS would be a superior buy.
