There’s a reason why dividend investing and income portfolios are so popular: they work. The more high-quality dividend stocks you own, the more cash flow you receive without having to do a thing. That passive income adds up fast. Over time, it can provide you with the flexibility and freedom to choose how and when you want to work or even whether you want to work at all.
That’s what financial freedom is all about—replacing your active income with reliable, consistent cash flow from your investments. However, not all income portfolios are created equal.
The key is focusing on finding quality companies and buying them to own for the long haul. That’s why you need to own stocks that are dependable.
In addition to finding quality stocks, though, it’s also essential to diversify your investments well in order to truly make your income portfolio unstoppable.
So, if I have cash and want to ensure you’re building the best passive-income portfolio you possibly can today, here’s exactly how I’d go about it.
The best stocks to buy have reliable operations
The first thing to do when building an income portfolio is to ensure you’re buying the highest quality companies with reliable and defensive operations. For example, Emera (TSX:EMA) and Enbridge (TSX:ENB) are two of the best in Canada.
Because of these reliable operations, Emera and Enbridge are two of the most dependable dividend stocks in the country, having proven for years that they can consistently generate cash flow regardless of the economy’s performance.
For example, Emera is a regulated utility company. It supplies electricity and natural gas across several markets, and essentially, all of its operations are regulated by the government, ensuring highly predictable revenue and cash flow, which is why it’s such a low-risk and low-volatility stock. It also means that even when markets are volatile, Emera continues to bring in steady cash flow and pay a reliable dividend.
Meanwhile, as one of the largest pipeline and energy infrastructure giants in the world, Enbridge is everywhere, but it primarily transports oil and natural gas across North America. And because most of its cash flow comes from long-term contracts that are often inflation-linked, Enbridge is another stable company with predictable future revenue and cash flow growth.
Both Emera and Enbridge provide essential services and are large, well-run and well-established companies. That’s what makes them so reliable. People will always need power, heat, and fuel. That means these companies will always generate revenue, which is why they are two of the best dividend stocks in Canada and make perfect investments for your income portfolio.
Dividend-growth stocks are ideal for long-term income portfolios
When it comes to buying dividend stocks, one of the biggest mistakes beginner investors make is chasing the highest yields instead of focusing on the highest-quality businesses. But it’s the quality of the company that matters most.
High-quality businesses are more reliable, have stronger financials, and are far less likely to run into issues down the line. And because they’re constantly investing in growth, they often offer more upside over the long haul, which makes today’s yield less important than tomorrow’s potential.
That’s why if you’re building an income portfolio, the dividend yield is only one part of the equation. The growth rate is just as important. Because without consistent growth, your income gets eroded by inflation anyway.
That’s another reason why Enbridge and Emera are two of the best dividend stocks in Canada that are perfect for investors’ income portfolios.
Not only do they offer attractive yields, but they both have impressive dividend-growth streaks, demonstrating not only the ability to consistently remain profitable but also to continue growing their profitability.
For example, right now, Emera has a dividend yield of 4.6% and has increased its dividend for 18 consecutive years. Meanwhile, Enbridge’s dividend yield is currently sitting at just over 5.9%, and it has increased that payout to investors for three straight decades now.
So, if you’re looking to build an unstoppable income portfolio that can generate more cash every year, focusing on high-quality dividend-growth stocks is the best way to do it.