The Canadian markets are falling as fears of recession and the U.S. shutdown create panic ahead of the holiday season. The TSX Composite Index fell 7.7% since September 15, its steepest dip this year. One super dividend stock got pulled down 8.7% in this dip, creating a rare opportunity to lock in a yield as high as 8.17%.
To break it down in dollar terms, for every $43.4 invested, you can lock in $3.55 of yearly payout for decades to come. And this payout will also grow in the future.
The super dividend stock to buy for passive income
The stock in discussion is North America’s largest pipeline company, Enbridge (TSX:ENB). The last time the stock traded below $43 was in early 2021. However, it’s not about the stock price; the payout makes it an exciting time to buy Enbridge.
All passive-income portfolios have this stock. You might have purchased it for around $48 or $53 per share and locked in a 6.5% yield. But standing today, you can buy 282 shares of Enbridge for $12,267 and earn $1,000 a year in passive income. This income you can get next year and the next and the next.
The bull case for Enbridge
What makes me confident is Enbridge’s 68 years of dividend-paying legacy. The company lived through the early 1980’s crisis, when tighter monetary policies caused two recessions back to back, followed by an oil crisis. Something similar seems to be happening now as economies keep facing one crisis after another.
Enbridge managed to withstand the worst crisis with its resilient business model. Even in the current scenario, the fundamentals haven’t changed for the pipeline operator. It maintains positive income and operating cash flow, a 4.5 times leverage ratio. Its stock plunged when the company announced the acquisition of three gas utilities in America, which analysts believe Enbridge is buying for a premium.
From a long-term perspective, Enbridge opted for this acquisition because it wants to increase its natural gas revenue share to 50%. Oil is a depleting energy source as the industry is transitioning towards greener alternatives. The gas utility business will help Enbridge sustain its cash flows and dividend growth even when oil usage declines.
Buy 282 shares of Enbridge for $1,000/year in passive income
Assuming you buy 282 shares of Enbridge today for $12,267. At a +8% dividend yield, your amount could double in nine years, according to the Rule of 72. But if Enbridge continues to grow its dividend at a 3% average annual rate, your $1,000 passive income could double in eight years.
All you have to do is reinvest your dividend to buy more shares of Enbridge. I have assumed an average annual share price of $50. You could even reduce this price by making opportunistic buys when the stock falls below $48.
You can run different scenarios in the table below and see how a lower average share price can enhance your dividend income.
| Year | ENB Stock Price | ENB Share count | Total Share Count | ENB Dividend per share | Total dividend |
| 2024 | $43.50 | 282.00 | 282.00 | $3.55 | $1,001.10 |
| 2025 | $50.00 | 20.00 | 302.00 | $3.66 | $1,104.26 |
| 2026 | $50.00 | 22.00 | 324.00 | $3.77 | $1,220.25 |
| 2027 | $50.00 | 24.00 | 348.00 | $3.88 | $1,349.95 |
| 2028 | $50.00 | 27.00 | 375.00 | $4.00 | $1,498.33 |
| 2029 | $50.00 | 30.00 | 405.00 | $4.12 | $1,666.75 |
| 2030 | $50.00 | 33.00 | 438.00 | $4.24 | $1,856.63 |
| 2031 | $50.00 | 37.00 | 475.00 | $4.37 | $2,073.87 |
At the $48 average share price, you could earn an annual dividend of $2,123 by 2031 and $2,020 at $53.
Investing tip
If the economy falls into a recession, Enbridge shares could fall below $40 and stay there throughout the year. It is a good chance to lower your average cost. There are other Dividend Aristocrats like Enbridge that have taken a plunge in this bear market.
You can go dividend shopping and get a bagful of dividend treats this Halloween.
