It’s always advisable to have multiple revenue streams, which will help you create long-term wealth. One of the cheapest ways to create a passive stream of income is by investing in blue-chip, dividend-paying stocks such as Enbridge (TSX: ENB)(NYSE: ENB), TC Energy (TSX: TRP)(NYSE: TRP), and Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN).
Blue-chip companies have a wide economic moat, allowing them to generate cash flows across business cycles. These companies continue to invest heavily in capital expenditures, allowing them to increase dividend payouts over time.
Enbridge
One of the largest midstream companies in the world, Enbridge generates around 85% of its EBITDA from oil and gas pipelines. Further, 12% comes from its natural gas utility business and the rest from its renewable energy portfolio. While renewable power accounts for a small portion of cash flow, Enbridge has allocated around a third of its capital investment plans for this business.
Enbridge’s cash flows are backed by long-term contracts, making it immune to fluctuations in commodity prices. Its fee-based business has allowed the company to increase dividend payments at an annual rate of 10% in the last 27 years. ENB stock offers investors a forward yield of 6.5%. Further, at the midpoint of its guidance range for 2022, Enbridge should increase distributable cash flows by 8% year over year, providing it with enough room to increase dividends this year.
TC Energy
TC Energy reported a net income of $1.1 billion, or $1.14 per share, in Q4 of 2021. Its operating cash flow stood at $6.9 billion in 2021 compared to $7.1 billion in 2020. Despite a marginal decline in cash flows, the company increased annual dividends by 3.4% to $3.60 per share. It was the 22nd consecutive year TC Energy increased dividends.
TC Energy confirmed that flows and utilization levels across its systems exceeded historical norms. It placed $4.1 billion of assets into service and sanctioned $7 billion of new projects. It also advanced $24 billion of commercially secured projects of which $6.5 billion will enter service in 2022. These projects should expand the company’s footprint in North America and will allow TC Energy to keep increasing dividend payouts going forward.
TC Energy offers investors a forward yield of 5.5% right now.
Algonquin Power & Utilities
The final stock on my list is Algonquin Power & Utilities, which increased adjusted EBITDA by 27% to $252 million. Comparatively, its net earnings per share stood at $0.15, which was in line with the year-ago period.
The company recently announced an agreement to acquire Kentucky Power, which is a vertically integrated regulated electric utility entity. Kentucky services 228,000 customer connections in 20 Eastern Kentucky counties. The enterprise value of the acquisition stands at $2.8 billion, which consists of $1.2 billion of debt and a cash purchase price of $1.6 billion.
AQN offers investors a forward yield of 4.8% and has increased these payouts at an annual rate of 7% in the last five years.
The Foolish takeaway
The average yield of the three stocks is 5.6%. Given the maximum TFSA contribution limit of $81,500 is distributed equally in these three stocks, investors will be able to generate $4,320 in annual dividends.
