Investing in dividend stocks is an attractive strategy for earning regular income. However, the abundance of companies distributing dividends makes the selection process somewhat tedious.
Therefore, to find the right income stock, investors should prioritize companies focused on enhancing their shareholders’ returns through regular distributions with a stellar history of consistent dividend payments and growth. Notably, a company with an extensive track record of both dividend payments and growth is likely to exhibit financial stability and an ability to generate profits in the coming years.
Furthermore, dividends are paid out of profits; thus, it is imperative to concentrate on companies with sound fundamentals and the capacity to expand their earnings irrespective of market conditions. This approach ensures the company can sustain its dividend payouts and grow its distributions annually.
In light of this, let’s look at a Canadian stock that has raised its dividend for the past 29 years.
A top income stock
When it comes to safe income stocks, Enbridge (TSX:ENB) emerges as a noteworthy choice. Boasting a dividend track record spanning over 69 years, Enbridge is renowned for consistently rewarding its shareholders. The company, primarily involved in oil and gas transportation, had demonstrated resilience by maintaining and increasing its dividends even during economic downturns such as the 2008 recession and the recent pandemic, when numerous energy companies had to suspend or reduce their payouts.
In November 2023, Enbridge announced a 3.1% increase in its dividend per share, resulting in a quarterly payout of $0.9150. This equates to an annualized dividend of $3.66 per share for 2024. While Enbridge has a robust history of distributing dividends, its dividend has exhibited a compound annual growth rate of 10% over the past 29 years.
Its payout history suggests that Enbridge strongly emphasizes growing its dividend. This supports my bull case and indicates that it could continue to increase its annual payouts in the coming years. Enbridge targets a sustainable dividend payout ratio of 60-70% of distributable cash flow (DCF). Moreover, it plans to increase its annual dividend in line with its DCF growth in the medium term.
Enbridge sports a compelling yield of 7.8%, based on the closing price of $47.14 on December 12. This makes it a reliable stock to earn a worry-free, high yield.
Bottom line
Enbridge has a commendable track record of paying and increasing the dividend. Moreover, its robust business model, characterized by a highly diversified range of revenue streams, strong demand, long-term customer contracts, and power-purchase agreements, positions the company favourably for generating significant DCF per share.
Enbridge is poised to benefit from its multi-billion-dollar secured projects and investments in conventional and renewable energy assets. These position the company to capitalize on the long-term energy demand. Besides organic growth, Enbridge’s focus on accretive acquisitions will likely accelerate its growth, further boosting its DCF per share. All these set the stage for continued dividend growth in the coming years.
Overall, Enbridge’s commitment to maintaining and growing its dividend, high yield, and solid fundamentals make it a safe stock for income investors.
