Even though the S&P/TSX Composite Index has shown resilience, the economic uncertainty amid a higher interest rate environment could keep the stock market volatile. Nevertheless, equity investors can still earn steady passive income through Canadian dividend stocks that are fundamentally strong and have the potential to maintain and grow their dividends amid all market conditions.
In this article, I’ll focus on a top Canadian stock that could help you earn worry-free passive income, regardless of the volatility in the broader market.
But before digging deeper, it is important to highlight here that dividend payment is not guaranteed. Further, investors must diversify their income portfolios and not rely on a single stock. Against this backdrop, let’s zoom in on a top passive-income stock.
A top dividend stock to earn steady cash
Thankfully, the TSX has several high-quality dividend stocks with stellar dividend payment histories. But investors shouldn’t buy a dividend stock solely based on its past payout record. While the payout history is important, one must also carefully analyze a company’s future earnings potential. At the same time, investors should focus on a stock’s payout ratio to ascertain whether it is sustainable in the long term. This will ensure worry-free cash inflow for years.
Speaking of such a fundamentally strong company, Enbridge (TSX:ENB) tops my mind. The company operates in the energy space and provides the infrastructure needed to transport oil and gas.
The company also has ownership interests in renewable energy facilities, which augurs well for future growth. Furthermore, it commands a market cap of over $106 billion and offers a lucrative dividend yield of about 6.8% based on the closing price of $52.32 on April 4.
Why is Enbridge a compelling passive-income stock?
As Enbridge plays a prominent role in the energy value chain, the demand for its assets remains high, leading to a higher utilization rate and increased revenues. Furthermore, the company’s investments in conventional and renewable energy assets position it well to capitalize on the energy demand for the long term and deliver solid DCF (distributable cash flow) to cover its dividend payouts.
Enbridge has over 40 diverse cash streams that lower risk. Moreover, the company benefits from long-term contracts with provisions to minimize price and volume risks.
It’s worth highlighting that this large-cap stock has consistently enhanced its shareholders’ returns through dividend hikes amid all market conditions. Notably, Enbridge increased its dividend even amid the pandemic when most energy companies announced dividend cuts. To be precise, Enbridge increased its dividend at an average annualized growth rate of 10% in the last 28 years. Further, it has been uninterruptedly paying dividend for 68 years.
Bottom line
Enbridge’s solid payout history shows the resilience of its business model. Moreover, its diversified cash streams, contractual arrangements, revenue escalators, inflation-protected earnings, and multi-billion-dollar secured capital program implies that the company could continue to deliver strong DCF//share and enhance shareholders’ returns. Also, its dividend-payout ratio of 60-70% of DCF is well covered and sustainable in the long term.
| Company | Recent Price | Number of Shares | Dividend | Total Payout | Frequency |
| Enbridge | $52.32 | 382 | $0.887 | $339 | Quarterly |
The table shows that if you buy about 382 shares of ENB stock, you can make $339 in passive income every quarter, or approximately $113 per month. To buy 382 shares of Enbridge, one would require about $20,000.
