For those heading into retirement, focusing on investing in companies with safe and predictable long-term cash flows is an immensely important task, especially if one is relying on the dividend income from such investments over a long period of time.
With Canada’s oil and gas sector still in a slump (to put it nicely), I’m going to point out two companies with nice dividend yields that I believe will outperform over the long run for investors who are willing to be patient.
Despite having taken quite the dip of late, I have remained confident in my long-term assessment of Enbridge Inc. (TSX:ENB)(NYSE:ENB) for a number of reasons.
In terms of the company’s dividend yield, few companies can boast the track record of not only dividend payments, but dividend increases that Enbridge can. The company has committed to continuing to increase its dividend in the double-digit range for as long as possible, and it has continued to deliver on that promise.
While the company recently needed to engage in asset divestitures to drive its dividend-growth and debt-repayment plan, the long-term strategic outlook for Enbridge remains one supported by massive long-term assets with excellent long-term fundamentals and capacity contracts that secure the company’s top and bottom lines for the foreseeable future.
Enbridge expects its Spectra Energy acquisition to add fuel to its growth strategy long term, with the company’s restructuring a testament to the belief of Enbridge’s management team that vertically integrating the company’s operations will serve the best interests of shareholders in the long term.
Speaking of companies that are vertically integrated, Suncor Energy Inc. (TSX:SU)(NYSE:SU) remains a top pick of mine for just this reason. Suncor is Canada’s paramount energy company, owning downstream, midstream, and upstream assets across a variety of sub-sectors. The company’s network of downstream assets, including four refineries and 1,750 gas stations, provide a level of profitability in any climate, supplementing the firm’s vast oil sands production in Western Canada.
While Suncor’s yield is approximately half that of Enbridge, the company’s balance sheet remains superior, and investors stand to benefit greatly from a growing dividend over time.
Both Enbridge and Suncor have the long-term fundamentals to support a retirement income strategy over decades; with yields of 5.7% and 2.8%, respectively, these firms are underpinned by a solid long-term dividend-growth strategy, which has the potential to take each company’s current yield much higher in the years to come.
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Fool contributor Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.