When it comes to investing, passive income is one of the most important aspects to help you to grow your savings.
Investors should always be searching for new ways to grow their income levels, whether through buying higher-yield stocks or finding companies that continuously grow their dividend, giving you a natural boost to your passive-income levels.
If you’re seeking a stock that grows its dividend often, you’re best off starting with the Canadian Dividend Aristocrats list, a group of the best and most reliable dividend paying companies that have increased their dividends consistently for at least the last five years.
BCE, the largest telecom and one of the biggest companies in Canada is the first company to consider.
Its business is composed of its Wireline, Wireless and Media businesses, which account for 51%, 37%, and 12% of its total revenue respectively.
The wireline business consists of its home phone, T.V. and cable services. The segment continues to remain robust as BCE improves its margins, a direct result of the cost-cutting that BCE has been implementing.
The company is also using its industry-leading earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 44% to support the big investments it’s making in fibre technology.
BCE expects to grow its revenue by 1% to 3% for fiscal 2019, but expects its EBITDA to grow at 5% to 7% for the same period. Its strong improvement in profitability is just one of the many reasons why BCE is such an attractive investment.
On top of the expected growth in EBITDA, the company is also expecting to grow its free cash flow by 7% to 12% in 2019. This is significant because BCE aims to pay out 65% to 75% of its free cash flow, so the more it grows its free cash flow the larger the increase to the dividend will be.
Up to 2019, in the last five years BCE has increased the dividend by more than 28% or a compounded annual growth rate (CAGR) of more than 5% and today the dividend yields a little over 5% for investors.
There are plenty of great long-term companies on the Canadian Dividend Aristocrats list, but none are more promising than BCE.
Like BCE, Enbridge is one of the biggest companies in the country, it’s also one of the most reliable companies as well though.
The company’s services are paramount to the North American economy as its infrastructure transports up to a quarter of the total oil and natural gas in North America.
Though a lot of what investors focus on is its energy infrastructure business, it also owns a utility.
Its business is highly reliable for a number of reasons including its predictable cash flows, the importance of its services and its minimal exposure to commodity prices.
In its most recent earnings report, the third quarter earnings from fiscal 2019, Enbridge reported record EBITDA in addition to completing important upgrades to improve the efficiency of its pipelines.
The growth in EBITDA and distributable cash flow is similar to the strong growth BCE has been generating.
Up to the end of the third quarter, distributable cash flow was up by 5% from the same period the year prior. The increase in distributable cash flow stems primarily from growth in Enbridge’s EBITDA, allowing the company to increase its dividend already going into 2020.
In the last five years, Enbridge has grown its dividend by more than 74%, or a CAGR of more than 11.5%. The dividend yields approximately 6% today and going forward, Enbridge is targeting 5% to 7% annual growth, an attractive growth rate for a reliable dividend.
Whether you choose BCE, Enbridge or both, these companies are the best of the best and can be relied upon to grow and return you passive income each year, while making up a core portion of your portfolio.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.