Investing a portion of your savings in high-yield dividend-paying stocks can boost your income, even in a challenging market. Moreover, high-yield dividend stocks have lower payback periods and enable investors to reinvest the same to create wealth in the long term. Against this backdrop, here is my top no-brainer, high-yield Canadian stock worth buying in 2023.
Top high-yield dividend stock
The Canadian stock market has several high-quality stocks offering dependable dividends and high yields. However, Enbridge (TSX:ENB), with its impressive dividend payout and growth history and attractive yield, remains my top pick in all market conditions.
Enbridge owns energy infrastructure assets. It transports and exports crude oil and other liquid hydrocarbons. Further, it operates a regulated natural gas utility business. In addition, Enbridge also has a small and growing portfolio of renewable energy facilities.
Thanks to its high-quality asset base, Enbridge transports a significant amount of oil and gas in North America. Moreover, this large-cap company sports a market cap of more than $97 billion.
Enbridge has a solid track record of consistently delivering annual dividend increases and enhancing shareholder returns. It has paid a regular dividend for over 68 years. Furthermore, it raised the same for 28 consecutive years. Enbridge’s dividend grew at a CAGR (compound annual growth rate) of 10% since 1995. Impressively, Enbridge stock offers a compelling dividend yield of over 7.3% (based on its closing price of $48.15 on July 11).
Why is Enbridge a dependable income stock?
Enbridge, with its high-quality assets, plays a key role in energy supply. Thus, the company witnesses high utilization of its existing network that supports consistent growth. Further, its disciplined capital-allocation strategy and diversified portfolio of conventional and low-carbon energy assets enable it to generate low-risk and resilient cash flows across commodity and economic cycles.
Thanks to its resilient business, Enbridge continued to pay and grow its regular dividend even amid the pandemic when most energy companies suspended or lowered their payouts due to diminishing demand.
Enbridge also benefits from long-term contracts, regulated cost-of-service tolling frameworks, power-purchase agreements, and low-risk commercial arrangements.
Looking ahead, Enbridge’s two-pronged growth strategy, including the selective investment in conventional businesses and lower-carbon platforms like renewables, hydrogen, and carbon capture and storage, position it well to capitalize on the energy demand. Furthermore, its focus on strengthening its balance sheet and investments in low capital intensity and regulated utility or utility-like projects augur well for DCF (distributable cash flow) growth.
It’s worth highlighting that Enbridge expects to generate sufficient self-funding capacity each year that will enable the company to invest in growth opportunities without diluting shares and maintaining key credit metrics. Besides organic growth, complementary accretive acquisitions will likely accelerate its growth and support higher payouts.
Bottom line
Enbridge’s solid dividend payment and growth history, resilient business model, growing cash flows, and stellar yield make it a dependable stock to earn worry-free income. Furthermore, Enbridge’s target dividend-payout ratio of 60-70% of DCF is well covered and sustainable in the long run.
