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Passive Income: 2 Top Dividend Stocks to Own for Decades

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Pensioners and other passive-income investors want to get the best possible returns from their savings without taking on too much risk. GIC rates don’t even cover inflation these days, so people are turning to top dividend stocks for higher yields.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) is a giant in the North American energy infrastructure industry with a market capitalization of $100 billion. The business includes oil and natural gas pipelines, natural gas storage, natural gas utilities, and renewable energy assets.

Enbridge transports roughly a quarter of all the oil that is produced in Canada and the U.S. and moves 20% of the natural gas used in the United States. The vast pipeline networks are strategically important for the Canadian and American economies and hold great value. This is particularly true in an era of rising government and public opposition to new major pipelines.

Enbridge still has ample organic growth developments on the go, with a heavy focus on the natural gas operations. The company is on track to put $10 billion of new assets into service in 2021.

Management expects distributable cash flow to grow by 5-7% annually through 2023. This should support dividend increases in the same range. Enbridge raised the payout for 2021, despite the tough run last year. The dividend provides a yield of 6.75% at the current stock price near $49.

Enbridge has the financial clout to make strategic acquisitions to boost revenue growth along with the organic projects. Future development investments will likely focus on the natural gas and renewable energy sides of the business. As a result, investors should feel confident that the distribution growth will extend beyond 2023.

The stock appears undervalued right now, and investors can pick up an attractive return on a dividend that should be very safe. Enbridge traded above $56 per share before the pandemic. It wouldn’t be a surprise to see the stock price drift back to that level by the end of 2022.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is Canada’s third-largest bank, but with a market capitalization of $96 billion, it is still a financial powerhouse.

The bank’s large international business, which focuses on Latin America, differentiates Bank of Nova Scotia from its peers. The core international operations are located in Mexico, Peru, Chile, and Colombia. At first glance, this might cause investors some concern. The pandemic hit these members of the Pacific Alliance trade bloc particularly hard, and ongoing political issues in the four countries add risk.

That said, the long-term opportunities are attractive. Bank penetration in the combined market of more than 230 million consumers remains at less than 50%, and an expanding middle class offers strong growth potential. Bank of Nova Scotia still generated $429 million in profits in the international banking division in fiscal Q2 2021, despite the challenging environment. Total net income for company in the latest quarter came in at $2.5 billion. That’s pretty good for three months of operations.

The Canadian government is expected to give the banks the green light to start hiking dividends again later this year or in early 2022. Bank of Nova Scotia is sitting on excess cash, so investors could see a series of generous distribution increases in the next couple of years.

The stock trades at a reasonable multiple right now and offers a solid 4.5% dividend yield.

The bottom line on top dividend stocks for passive income

Enbridge and Bank of Nova Scotia are top Canadian dividend stocks that pay generous distributions that should continue to grow for years. If you are searching for high-yield stocks to generate reliable passive income, these two look cheap and offer attractive returns.

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.

The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends BANK OF NOVA SCOTIA. Fool contributor Andrew Walker owns shares of Enbridge.

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