3 Dividend Stocks to Buy Right Now for Income and Upside

Income investors today don’t have to settle for choosing between yield and growth. In this market, a handful of blue-chip Canadian names still offer a compelling blend of reliable income and meaningful upside potential driven by solid fundamentals.

Here are three of the top names I think long-term investors should consider within the relevant universe of Canadian dividend stocks.

Fortis

Canadian utilities giant Fortis (TSX:FTS) is among the leading dividend stocks I continue to pound the table on.

Fortis is the quintessential “sleep-at-night” utility, and that’s exactly what makes it such an attractive total-return play right now. With 10 regulated electricity and gas operations across North America, roughly all of Fortis’s cash flow comes from regulated assets. That regulated cash flow translates into remarkably stable earnings, even through economic cycles. Management has raised the dividend for 52 consecutive years, supported by a payout ratio hovering in the 70% to 75% range (healthy for a utility) and a current yield in the mid‑3% area that already beats that of many GICs.

Where the upside comes from is Fortis’s growing regulated rate base, underpinned by a multi‑year capital plan focused on grid modernization and decarbonization. Those investments are expected to drive mid‑single‑digit earnings and dividend growth. That’s the kind of earnings growth that, when combined with today’s reasonable valuation for a defensive name, sets the stage for attractive risk‑adjusted total returns as rates drift lower over time.

Canadian National Railway

For investors looking for a top dividend stock with the potential to outperform over the very long term (given its cyclical exposure to the overall North American economy), Canadian National Railway (TSX:CNR) is a top option to consider.

CN Rail is one of those rare businesses that can quietly compound shareholder wealth in the background, and I think the recent bout of volatility has opened up a buying window. The company’s coast‑to‑coast network is incredibly difficult to replicate, giving the company durable competitive advantages and pricing power that show up in one of the best operating ratios in North America. Indeed, CN Rail has a long track record of steadily growing its dividend, backed by consistent profitability and disciplined capital allocation, rather than financial engineering.​

Importantly, CN’s growth is tied to broad economic drivers like population, trade, and industrial activity, not any single commodity, which helps smooth out earnings through the cycle. With a solid balance sheet, ongoing share repurchases, and earnings growth expectations in the high single digits over time, investors buying CNR stock today are getting a modest but growing yield plus meaningful capital appreciation potential as volumes and pricing grind higher.

BCE Inc.

Last, but certainly not least, we have BCE Inc. (TSX:BCE).

This top-tier blue-chip Canadian telecom giant has been through a painful reset, but that’s precisely why the stock is starting to look interesting again for investors focused on total return.

After trimming its dividend to a more sustainable level, BCE now pays a quarterly distribution of $0.4375 per share, good for a yield around 5.4%. Importantly, this yield screens as one of the strongest yields among large Canadian telecoms. The key, in my view, is that this payout is now on firmer footing, backed by still‑resilient cash flows from its nationwide wireless and broadband network.​

On the valuation side, the reset has compressed the stock’s valuation to roughly five times trailing earnings, leaving BCE trading at levels that look more like a deep‑value opportunity than a bond proxy. As capital intensity eases and interest‑rate pressures moderate, there’s room for free cash flow to grow, which could support modest dividend increases over time. And perhaps more importantly, a rerating in the share price that would reward investors who are willing to step in while sentiment remains subdued.​

The post 3 Dividend Stocks to Buy Right Now for Income and Upside appeared first on The Motley Fool Canada.

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More reading

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Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and Fortis. The Motley Fool has a disclosure policy.