While many investors choose to invest in stocks at low prices and sell them at higher prices to turn a profit, some investors choose to use the stock market to create a revenue stream that allows them to earn consistent and passive income. Income-generating assets like dividend stocks offer you the advantage of enjoying returns through capital gains and extra cash through payouts.
The Canadian stock market is host to several high-quality dividend stocks that have provided investors with consistent and reliable payouts to line their accounts with cash for years. You can buy these stocks and hold onto them for decades. Sure, you might want to consider selling the stocks at some point, but if you don’t, you can still enjoy substantial wealth growth through dividends regardless of share prices.
You can even reinvest your dividend income to unlock the power of compounding and accelerate your wealth growth. Finding high-quality dividend stocks that offer consistent returns is the key to creating a successful dividend income portfolio. I will discuss two such stocks that you could consider adding to your portfolio based on their past performance and future outlook.
Enbridge (TSX:ENB)(NYSE:ENB) has been enjoying a strong run in recent weeks, as the anticipation of a reopening economy has led to a surge in oil demand. The company has a strong future in the oil and gas pipeline industry. Despite a gradual and global shift to clean energy that’s expected to phase out fossil fuels, Enbridge stands to make billions for a few decades. The company generates most of its income through long-term contracts, and it has $10 billion worth of projects that will come online before this year ends.
Enbridge also boasts an excellent dividend track record, especially when it comes to increasing its payouts. Enbridge stock has been paying dividends to its shareholders each year for 66 years and increasing them for the last 26. After its most recent dividend hike, Enbridge is paying its shareholders at a juicy 6.69% dividend yield.
BCE (TSX:BCE)(NYSE:BCE) is the largest telecom company in Canada, and it is another stellar dividend stock to add to your portfolio for the long run. The company caters to the telecommunication needs of more than 60% of the Canadian population. In an increasingly digital world, BCE’s services have effectively become essential to every industry and individual. It means that the company can continue generating revenues, regardless of economic conditions.
The demand for its services is only set to increase as the telecom giant continues investing in its 5G infrastructure. BCE stock is trading for almost $62 per share at writing, and it boasts a juicy 5.65% dividend yield that you can lock into your portfolio right now.
Creating a portfolio of income-generating assets and storing it in your Tax-Free Savings Account (TFSA) can help you earn substantial passive income without incurring any taxes that the Canada Revenue Agency can take away from you. Depending on your financial goals, a dividend income portfolio could be ideal to meet your short- and long-term needs.
If you want to create a dividend income portfolio in your TFSA that you can rely on for decades to come, Enbridge stock and BCE stock could be ideal foundations for 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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.