Want Passive Income for Life? It Only Requires 1 Move

Earning passive income for life begins with the purchase of established dividend stocks with dividend-growth potential.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Passive income refers to money earned with little or minimal effort. Canadians are fortunate, because it only requires one move to create earn passive income for life: purchase established dividend stocks with dividend-growth potential to boost your retirement income significantly.

Enbridge (TSX:ENB)(NYSE:ENB) and BCE (TSX:BCE)(NYSE:BCE) are TSX’s top buy-and-hold stocks. Besides the enduring businesses, their dividends tend to grow over time. Likewise, dividend growth should enable investors to outpace inflation. For younger investors with long timelines, the energy king and telco giant can set them up for dividend-income living in the future.

Utility-like business model

Enbridge currently pays an ultra-high 6.50% dividend yield. At $42.27 per share, investors enjoy an 8.2% year-to-date gain. Assuming you invest $75,000 today, your money would compound to $192,888 in 15 years. If the yield remains constant, the quarterly dividends in 2037 would be $3,134, or $1,044 per month.

The $83.98 billion energy infrastructure company has the financial capacity to grow and sustain its dividend growth. Enbridge’s low-risk, utility-like business model and four best-in-class franchises are the reasons for the leading shareholder returns. The total return in the last 46.11 years is a commanding 52,002.67% (14.53% CAGR).

Management’s ongoing concern is to develop its existing assets (gas distribution, gas transmission, and liquids pipeline) and building a new renewable power portfolio. The competitive advantages are the diversified sources of cash flows and predictable cash flows.

About 98% of Enbridge’s cost of service are highly contracted, and 95% of clients are investment grade. Another unique advantage is that 80% of EBITDA has built-in inflation protection. Moreover, the company is confident its businesses have high visibility to attract organic growth opportunities. It should drive future cash flow growth.

Enbridge expects distributable cash flow (DCF) per share to grow by 5-7% (CAGR) through 2024. From 2022 to 2024, the company has a secured capital program of $9 billion and an annual investment capacity of $5 billion to $6 billion. Given the low-risk commercial and financial profile, this energy stock’s dividend-growth streak should extend to 28 consecutive years in 2022.

Top 5G stock

Canada’s most dominant telecommunications company pays an above-average 5.27% dividend. At $66.40 per share, the trailing one-year price return is 29.5%. BCE’s total return in 46.11 years is 76,720.97% (15.5% CAGR). The $59.29 billion company’s first dividend payment was in 1881, and it hasn’t a missed a payout since.

On February 1, 2022, Bell won top honours from Global Wireless Solutions (best 5G network) and PCMag (fastest 4G and 5G mobile network). Ookla also named Bell as Canada’s fastest 5G network. BCE will release its Q4 and full-year 2021 results today. Industry analysts expect a 5.3% revenue increase from Q4 2020.

BCE didn’t disappoint investors in Q3 2021, as evidenced by the 0.8% and 9.9% growth in operating revenues and net earnings versus Q3 2020. Management cited the strong marketplace performance, exceptional liquidity, and well-structured balance sheet for the impressive results. It also said BCE’s net debt leverage ratio is the lowest in the sector.

Increase financial security

Apart from being wealth builders, Enbridge and BCE increases the financial security levels of investors. Canadians can expect a very comfortable retirement with substantial passive income on top of their Canada Pension Plan and Old Age Security pensions.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge.

More on Dividend Stocks

Canadian Dollars
Dividend Stocks

Buy 734 Shares of This Top Dividend Stock for $9,574 a Year in Passive Income

Are you looking to earn regular income? Now is an opportune time to buy Dividend Aristocrats at discounts and accelerate…

Read more »

A plant grows from coins.
Dividend Stocks

This Ultra-High Yield Stock Just Hit a 52-Week Low, and it’s Still a Buy Today

Enbridge Inc (TSX:ENB) stock recently hit a 52-week low. Here's why.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 6% Dividend Stock Pays Cash Every Month

Are you looking to earn cash every month from October 15 onwards? This 6% dividend stock gives you monthly payouts.

Read more »

Person slides down a stair handrail
Dividend Stocks

With a 7.6% Dividend, This TSX Stock Is One to Buy Now and Hold for Decades

Now is an opportune time to invest in this no-brainer TSX stock and get +$30 extra dividend for decades on…

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

CPP Benefits Will Be Higher for Millennials and Gen Z

Older Canadians won't get enhanced CPP, but they may invest in dividend stocks like Royal Bank of Canada (TSX:RY).

Read more »

A plant grows from coins.
Dividend Stocks

The Best Dividend Stocks in Canada Right Now

Seeking to give a boost to your income portfolio, consider investing in these best Canadian dividend stocks.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Retirees: Want Fast-Growing Passive Income? Here Are 3 Long-Term Dividend Stocks

Are you looking for dividend stocks that can grow their distributions very quickly? Here are three long-term picks!

Read more »

dividends grow over time
Dividend Stocks

2 Top Dividend Stocks You Can Buy and Hold Forever

The market is full of great dividend stocks, but not all are long-term gems. Here are two options that you…

Read more »