Dividend-paying stocks are an excellent choice to earn a steady income. Additionally, opting for a dividend stock with a high yield provides a means to outpace inflation.
However, as dividend distributions are not guaranteed, not all dividend-paying companies are suitable investments. Thus, investors should focus on a few critical parametres while selecting dividend stocks. For instance, one should look for stocks of companies with a consistent, preferably growing, dividend history. Corporations with a reliable track record of consistent dividend payouts often demonstrate greater stability.
Moreover, investors should assess the dividend yield, keeping in mind that while a higher yield may be enticing, excessively high yields could signal financial difficulties for the company. Additionally, it is crucial to concentrate on companies with a sustainable payout ratio. Most importantly, evaluating the company’s earnings growth over time is essential. A company with a history of increasing earnings is likely to maintain and bolster its dividend payments in the future.
In light of these parametres, Enbridge (TSX:ENB) stands out. The company boasts solid fundamentals and a stellar track record of dividend payments. Moreover, this high-quality, dividend-paying stock also offers a compelling yield. Against this background, let’s delve deeper into Enbridge to under why it is a no-brainer, high-yield stock to buy in 2024.
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Enbridge’s attractive dividend payment history
Enbridge stands out as one of the top dividend-paying stocks on the TSX, earning its status of a Dividend Aristocrat. Notably, it has sustained and raised its dividend payments for decades. For instance, Enbridge has paid a regular dividend for an impressive 69 years. Moreover, it recently declared a 3.1% increase in its quarterly dividend to $0.915 per share ($3.66 annualized), effective March 1, 2024.
Including the recent hike, Enbridge has now increased its dividend for 29 years in a row. Furthermore, during the same period, its dividend has grown at a compound annual growth rate of 10%. What stands out is that Enbridge uninterruptedly paid and increased its dividend during the economic recession of 2008 and the pandemic. This shows the resiliency of its business model and payouts.
As growing its dividend is an essential component of Enbridge’s investor value proposition, the company could continue to increase its distributions at a healthy pace in the coming years.
Enbridge expects its annual dividend to grow consistent with its medium-term distributable cash flow (DCF) outlook. Further, the company targets a dividend payout ratio within 60-70% of DCF, which is sustainable in the long term. Additionally, it offers a high yield of 7.73% (based on the closing price of $47.30 on December 7).
Bottom line
Enbridge’s dividend payment history and high yield make it a compelling income stock. Its highly diversified revenue streams, consistent demand for its services, power-purchase agreements, and regulated cost-of-service tolling arrangements augur well for growth and will drive its DCF, which is forecasted to grow by 3% in 2024. Moreover, Enbridge is poised to benefit from its multi-billion-dollar secured projects (secured backlog to $25 billion), investments in conventional and renewable energy assets, and strategic acquisitions.
In summary, Enbridge is a top, no-brainer TSX stock one can buy for 2024.
