The Canadian stock market has remained resilient so far this year. Further, easing inflation and supply-chain headwinds supported the recovery in stocks. However, economic uncertainty, fear of recession, and a high interest rate environment keep the stock market volatile. Amid the uncertainty, dividend stocks appear attractive for stability and steady income.
Thankfully, the TSX has several fundamentally strong companies that generate resilient cash flows and consistently enhance shareholders’ returns through higher dividend payments. Against this backdrop, I’ll focus on a top Canadian dividend stock in this article that could help investors generate a reliable passive income, regardless of the volatility in the market.
One top dividend stock
While several Canadian corporations consistently pay and grow dividends, investors should take caution before investing, as dividend payments are not guaranteed. Thus, investors seeking reliable income should look for companies with resilient business models and growing earnings and cash flows.
Enbridge (TSX:ENB) stock, sporting a market cap of approximately $100 billion, is one such reliable investment for generating worry-free income. This energy company transports oil and gas. Further, it has ownership interests in renewable energy facilities, which positions it well to capitalize on energy transition opportunities.
Enbridge has paid regular dividend for 68 years. Further, it raised its dividend at an average annualized growth rate of 10% in the past 28 years. Impressively, Enbridge stock offers a lucrative dividend yield of about 7.16% based on the closing price of $49.57 on May 23.
Why is Enbridge a reliable income stock?
Enbridge’s assets continue to witness a high utilization rate. Further, its two-pronged growth strategy (investments in renewable and conventional assets) positions it well to capitalize on the energy demand.
Thanks to the resiliency of its business, Enbridge consistently generates low-risk, resilient cash flows across commodity and economic cycles that cover its dividend payments. Notably, Enbridge paid and raised its dividend even amid the pandemic when most energy companies announced a pause or cut their payouts.
Its highly diversified income streams, low-risk resilient cash flows, long-term contacts, regulated cost-of-service tolling framework, and power-purchase agreements position it well to deliver solid distributable cash flow (DCF)/share and drive higher dividend payments.
Enbridge is expected to benefit from a solid slate of secured projects with an emphasis on low capital intensity growth and regulated utility-like projects. While Enbridge is poised to enhance its shareholders’ returns through higher dividend payments, its payout ratio of 60-70% of DCF is well covered and sustainable in the long term.
Bottom line
Enbridge’s solid dividend payment history, ability to grow the dividend in all market conditions, resilient business, and increasing cash flows make it a solid stock to earn reliable passive income. While I am bullish about Enbridge stock and its dividend payouts, I recommend that investors diversify their portfolios and avoid investing all their money into a single stock.
| Company | Recent Price | Number of Shares | Dividend | Payout | Frequency |
| Enbridge | $49.57 | 282 | $0.887 | $250 | Quarterly |
Meanwhile, if you buy about 282 shares of Enbridge right now, you can earn approximately $250 in passive income every quarter, or about $1,000 per year. To buy 282 shares of Enbridge at the recent market price, one would need to invest about $13.98K.
