Investors who want to earn a steady stream of passive income should increase their exposure to dividend stocks. Ideally, these dividend-paying companies should generate stable cash flows across business cycles, allowing them to maintain and even increase dividend payouts amid market downturns. Here are such cash-gushing dividend stocks I'd buy this August.
Cogeco Communications stock
Valued at $2.7 billion by market cap, Cogeco Communications (TSX:CGO) is a telecom company that operates in two business segments. It offers internet, video, and internet protocol-based services to residential and small business customers through broadband fibre customers.
Cogeco pays shareholders an annual dividend of $3.42 per share, translating to a forward yield of 5.3%. In the last 12 months, the TSX dividend stock reported a free cash flow of $268 million or $5.27 per share, indicating a payout ratio of 65%.
Cogeco demonstrated solid performance in fiscal third quarter (Q3) of 2024 with revenue growth and healthy expansion of adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin due to an improving product mix and a focus on operational efficiency. It attributed growth in its Canadian telecom business to the expansion of its internet subscriber base.
Cogeco stock is cheap, trading at less than nine times forward earnings and at a 10% discount to consensus price target estimates.
Manulife Financial stock
A blue-chip Canadian company that operates in the recession-resistant insurance sector, Manulife Financial (TSX:MFC) pays shareholders an annual dividend of $1.60 per share, indicating a yield of 4.5%.
Manulife demonstrated positive momentum in Q2 with core earnings and new business growth of 9% and 23%, respectively. It aims to transform toward a higher return and lower risk business and recently closed the largest reinsurance transaction in Canada and the acquisition of CQS.
Manulife repurchased stock worth $1.1 billion and plans to buy back 90 million shares, returning over $3 billion to shareholders as part of its buyback program.
Priced at 9.5 times forward earnings, Manulife stock is cheap as its earnings are forecast to expand by 11.7% annually over the next five years. Analysts remain bullish and expect MFC stock to surge roughly 6% in the next 12 months.
Enghouse Systems stock
The final TSX dividend stock on my list is Enghouse Systems (TSX:ENGH), which offers you a dividend yield of 3.5%. In the last four quarters, Enghouse Systems reported a free cash flow of $127 million or $2.28 per share, while its annual dividend payment is $1.04 per share, indicating a payout ratio of 45.6%.
Enghouse provides supply chain solutions to enterprises and operates on a SaaS (software-as-service) model, resulting in recurring revenue. In Q2 of 2024, Enghouse reported revenue of $125.8 million, up 11% year over year. Its SaaS sales rose 18.6% to $85 million, accounting for 67.5% of total revenue.
An asset-light business model allowed Enghouse to benefit from operating leverage and improve operating profits by 30.5% to $33.5 million. Priced at 20.9 times forward earnings, Enghouse Systems stock is reasonably cheap, given its widening profit margins and stellar growth rates.
Analysts are bullish on the TSX stock and expect it to gain 30% according to consensus price targets.