People invest in stock markets to create wealth. However, conservative investors prioritize capital protection and look at sustainable dividend yields to supplement their income. Dividend investing is perfect for investors with a low risk appetite.

For instance, if a company has a dividend yield of 5% and the stock price of the company falls by 5% in a year, the investor is essentially sitting on a 0% loss. If the stock price moves up by 2%, the investor is sitting on gains of 7%. If the stock price has moved down by 7%, the investor has only lost 2%.

A smart dividend investing strategy is to look at companies that can give you the dual benefit of capital appreciation and regular dividend income. However, similar to any other investment strategy dividend stocks also carry certain risks. A company pays dividends to shareholders from its profits. It means a dividend-paying company needs to report consistent profits across business cycles which is not easy. 

In the last year, several energy companies had to cut or entirely suspend dividends due to falling oil prices that impacted their bottom line negatively. This trend was witnessed in companies across sectors including retail, transportation, and hospitality. So, it’s important to identify companies that have predictable cash flows and a low payout ratio making their dividends sustainable. 

Here, we take a look at nine such companies that are you can buy through most online brokers. The list is a mix of companies with high room for capital appreciation while some are steady plodders. However, one common factor in all the nine is that they offer a minimum dividend yield of 5%.

#1 – TC Energy (TSE: TRP)

TC Energy is a major North American energy company headquartered in Calgary. It develops and operates energy infrastructure in Canada, Mexico, and the United States. It has three core businesses, which are energy, pipelines, and natural gas pipelines.

TC Energy’s natural gas pipeline spans 92,600 km, helping to transport over 25% of North America’s gas demand. The liquid pipeline runs through 4,900 km, shipping 590,000 barrels of crude oil daily and the energy division has 11 power generation facilities having a combined capacity of 6,600 MW, including ones powered by nuclear energy and natural gas.

Despite energy companies facing a rough 2020, TC’s business was stable, with a gross margin of 74% – one of its highest in recent times. It managed to generate $13 billion in revenue and $4.62 billion in profits. It met or beat analyst expectations in every quarter in 2020. TC Energy is currently trading at $61.57 with a dividend yield of 5.65%, thus making it a good choice for value investors.

#2 – BCE (TSE: BCE)

BCE is a telecommunications and media company. With work mostly being done from home in the past year thanks to the COVID-19 situation, almost all Canadians relied heavily on dependable and speedy internet connections.

The company’s momentum in Q1 of 2021 slowed down with net income falling 5.6% to $642 million compared to the same period in 2020. Operating revenue, however, was 1.2% higher compared to 2020 at $5.7 billion.

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BCE’s broadband segment grew 51% in Q1, and it managed to acquire 21,208 new retail internet clients as well. Very few companies managed to provide stiff competition to BCE Inc. in this segment.

The company is already looking to lay the foundation of its continued 5G growth and is accelerating the rollout of its fibre-optic network, thus promising the fastest speed and best performance to customers. BCE says it is on track to reach 6.9 million customers with fibre and wireless home internet connections in 2021.

As of Q1 of 2021, BCE had a quarterly dividend of $0.875 per share, which indicates a strong yield of 6%.

#3 – Canadian Utilities (TSE: CU)

Canadian Utilities is part of the ATCO Group of companies. This is one of the safest companies on the stock exchange with 95% of its revenues coming from regulated sources, and the balance 5% comes from long-term contracts. Its cash flows are both stable and predictable which lets it pay out a dividend yield of 5%.

Canadian Utilities has increased its dividend for 49 straight years. The stock will not generate outsized returns but it is a great source for passive income. The company’s first quarter 2021 adjusted earnings were $141 million, $19 million lower than the same period in 2020. It recently invested $230 million in capital projects out of which 96% was in regulated utilities.

One important point to note for long-term investors in Canadian Utilities is that the company has frozen electricity and natural gas distribution utility rates for 2021. It will also start collecting deferred amounts in 2023. Investors should not be too worried about the company’s cash flow as its revenues are stable due to a diverse portfolio of cash-generating assets.

#4 – Northwest Healthcare Properties REIT (TSE: NWH.UN)

Investors like dividend companies because of their passive income. How about a company that pays out dividends every month! That’s what NorthWest Healthcare Properties, a Toronto-headquartered REIT does. 

The REIT provides investors access to a portfolio of high-quality international healthcare real estate infrastructure that comprises interests in 188 income-producing properties as well as 15.5 million square feet of gross leasable area in several markets all around the world.

Northwest Healthcare signs long-term contracts with its clients and its average leases run 14.5 years. It helps that around 80% of its clients receive government funding which ensures a stable cash flow for NorthWest. Other than stable occupancy, its tenants and partners are also leading healthcare operators. NorthWest does continue to scale well, post its European expansions. The company managed to acquire 10 high-quality hospitals in the UK for $620 million, in 2020.

NorthWest also spent close to a billion dollars in accretive acquisitions last year, which includes a first-of-its-kind life sciences building in Australia. As of May 6, the real estate stock was trading at $13.1 and its dividend yield was a handsome 6.13%.

#5 – Pembina Pipeline (TSE: PPL)

Pembina Pipeline Corporation is one of the leading midstream energy transportation service providers in North America. It is another company on the list that makes monthly dividend payouts. It has a dividend yield of 6.45%. It has increased its dividend payments by 5% every year for the last 10 years.

After a not-very-good 2020, the company’s share price has increased by over 26% in 2021. As economies around the world open up, and oil prices start moving upward, the company’s bottom line will improve as well.

The management is also planning on investing $785 million this year as CAPEX and has expected EBITDA between $3.2 billion and $3.4 billion in 2021. The CAPEX is fully funded by its cash flow after dividends which gives you an idea of the cash strength of Pembina.

The company operates pipelines that span over 18,000 km and it has 19 gas processing facilities. The stock is a good buy simply on its fundamentals. Analysts say it has room to grow by 10% more. When you take into account the dividend yield, the stock is a winner.

#6 – Enbridge (TSE: ENB)

There’s no other way to say this but Enbridge is one of the best stocks to buy in Canada right now. Enbridge has an extensive network of pipeline assets that are responsible for the transportation of around 25% of crude oil produced in the continent. 

Enbridge has a three-layered moat and it is difficult to see someone break it. The pipeline business requires billions of dollars to build and maintain. The Enbridge clientele is made up of companies like BP and Marathon who like to sign long-term contracts. The business is full of changing regulations in a world that is not a fan of fossil fuels.

These three factors play a huge role in ensuring that Enbridge retains the top spot in North America when it comes to the midstream energy industry.

Enbridge stock is trading at $48.58 and has a dividend yield of 6.82%. As the price of oil goes up, Enbridge will benefit. Its renewable energy business is small right now, contributing just 3% to the overall portfolio but is growing quickly. The stock has gained 20% in 2021 and is likely to grow further.

#7 – Capital Power (TSE: CPX)

Capital Power is the perfect stock for the conservative investor. It has a dividend yield of 5.17% and it is a steady mover in the stock market as well. The stock has gained over 14% in 2021 so far. Capital Power has 28 facilities across North America and over 6,500 MW of power. The average life of a Capital Power contract is 10 years.

It reported cash flows of $206 million for the first quarter of 2021 and generated net income of $101 million, as well as adjusted EBITDA of $303 million in the quarter.

The company has given strong guidance for 2021. Based on the increase in its Alberta forward power prices, Capital Power is on track to generate AFFO (adjusted funds from operations) and adjusted EBITDA that is modestly above the top end of the $500 million to $550 million and $975 million to $1 billion annual guidance ranges for 2021.

It has also executed a 15-year renewable energy agreement with Labatt Brewing Company for the 75 megawatts Enchant Solar project in Alberta. Capital Power management says that it expects adjusted EBITDA from renewables to increase from 27% in 2020 to 34% in 2025.

#8 – IGM Financial (TSE: IGM)

IGM Financial, a wealth manager, based out of Canada with clients across the world, has been on a tear in 2021. Its stock price has gone up almost 30% this year. Its assets under management & advisement stand at a record high of $253.1 billion, up 1.9% in April and up 5.5% year to date.

For the quarter which ended in March 2021, the company had a net inflow of $2.2 billion which was an all-time best-quarter result. IGM Financial is trading at $44.99 and has a dividend yield of 5.03%

IGM also Financial increased its investment in Wealthsimple, a Canadian online investment service, from $550 million to $1.45 billion. A statement by the company said, “IGM is the largest shareholder in Wealthsimple and holds a 36% interest, prior to the closing of the transaction. Reflecting today’s revised valuation of Wealthsimple, IGM will increase its fair value assessment by $900 million ($3.78 per IGM share), from $550 million to $1.45 billion for such interest. This represents an approximately eight-fold increase in the value of IGM’s cumulative investment of $187 million and a compound annual return on investment of approximately 80%.”

#9 – Keyera (TSE: KEY)

Keyera is one of Canada’s largest midstream oil and gas operators. The company provides service to oil and gas producers in Western Canada and also helps transport natural gas liquids throughout North America.

Keyera took a hit in 2020 as oil prices fell. Analysts expect EPS to come in at $0.37 for Q1 of 2021, a drop from $0.39 in the corresponding period in 2020.

The company’s share prices have moved up by 28% in 2021. However, revenue is expected to grow to $1.16 billion compared to $1.06 billion in the prior-year period. The company is set to declare its results on May 11 and discerning investors might be inclined to wait until then to make a decision on buying shares in Keyera.

Keyera currently trades at $28.52 and has a dividend yield of 6.77%. The company is sitting on a 59% payout which is pretty comfortable for a midstream company.

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