Blue-chip companies are known for their strong fundamentals, consistent dividend payments and stable long-term growth potential. Given their large market capitalization, well-established businesses, healthy financial performance and solid balance sheets, these companies are less susceptible to market volatility, making them safer investment options. Against this backdrop, let’s take a look at three Canadian blue chip stocks with a dividend yield above 5%.
Enbridge
Enbridge (TSX:ENB) is a diversified energy infrastructure company that earns approximately 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from regulated assets and long-term take-or-pay contracts. The company has minimal exposure to commodity price fluctuations and approximately 80% of its adjusted EBITDA is indexed to inflation. Therefore, the company has healthy cash flows, allowing it to reward its shareholders with consistent dividend payments over the past 70 years. Furthermore, it has grown its dividend at an impressive compound annual growth rate (CAGR) of 9% since 1995 and currently offers a healthy dividend yield of 5.71%.
Additionally, Enbridge is expanding its asset base and expects approximately $23 billion in assets to come into service through 2027, increasing its financial position. Additionally, the company has identified $50 billion in growth opportunities across its business segments over the remainder of this decade, providing further insight into its growth prospects. In addition to these healthy growth prospects, the company has also improved its financial position by reducing its net debt to adjusted EBITDA ratio from five at the beginning of this year to 4.7. Given all these factors, I think Enbridge can sustain strong dividend payments for years to come.
Canadian natural resources
The second blue chip stock that I think would be an excellent buy is Canadian natural resources (TSX:CNQ), which operates oil and natural gas production facilities in Western Canada, Offshore Africa and the North Sea. With its diversified asset base, lower capital reinvestment needs and efficient operations, the company has a lower breakeven point. Therefore, it has healthy cash flows, allowing it to increase its dividend at a CAGR of 21% over the past 25 years. The company’s current quarterly dividend of $0.5875 yields a 5.38% yield over time.
CNQ is also strengthening its manufacturing capabilities through both organic and inorganic growth initiatives. The company plans to drill a net of 182 primary multilateral heavy crude oil wells this year while pursuing strategic acquisitions. With a lower breakeven point, these expansion initiatives can increase both revenue and profitability, strengthening the company’s overall financial performance. As a result, I believe CNQ is well positioned to sustain a strong dividend growth trajectory.
Telus
Telecommunications companies generate strong cash flows from recurring revenue streams, making them attractive options for income-oriented investors. In the meantime I have chosen Telus (TSX:T), one of the top three players in the Canadian telecom sector, as my final pick. Demand for telecommunications services continues to rise, driven by the digitalization of businesses and the increasing adoption of e-learning and remote working. Amid rising demand, the company continues to expand its 5G and broadband infrastructure through $70 billion in capital investments over the next five years. These expansions could expand the customer base and thus improve financial performance.
In addition, Telus’ healthcare segment continued to perform well and grow thanks to strategic investments, innovative product offerings and strengthened sales channels. Together with these healthy growth prospects, the solid financial position with liquidity of $6.1 billion makes future dividend payments more secure. Meanwhile, Telus has increased its dividend 28 times since May 2011 and currently offers a healthy dividend yield of 7.88%.
#Blue #Chips #high #returns