Who doesn’t like to earn without working? While you can work $40 hours a week at a young age, staying focused for so long gets difficult as you grow old. Also, you don’t want to spend your lifetime working. We can learn something from ants. They accumulate nectar during the spring and enjoy honey in the winter. While you are still earning a growing active income, you can invest money in stocks that can give you future passive income in your winter years.
A passive income stock you can buy without a doubt
The Canadian stock market has a rich collection of dividend aristocrats that have funded the retirement of many early investors.
Enbridge (TSX:ENB) has been paying dividends for over 69 years. Over these years, it underwent several economic crises and wars, perfecting its low-risk business model to tackle them effectively. And the outcome is 29 consecutive years of dividend growth. It is now transitioning from oil to natural gas and renewable energy as oil is a depleting industry.
Enbridge is acquiring three U.S. gas utilities and selling a 50% stake in the Alliance natural gas pipeline, Aux Sable processing plant, and NRGreen joint ventures to Pembina Pipeline for $3.1 billion. Between all these transitions, Enbridge is committed to growing its dividend by 3–5% annually.
Now that you know the qualities of this passive income stock, how you make the best of it is up to you. Here’s an investment strategy for Enbridge.
How to invest $250 a month for a $4,433 yearly passive income
Enbridge stock is a range-bound stock hovering between $40–$55. There are some outliers, but it has maintained this range since 2012. You can invest $250 every month in Enbridge, irrespective of the price. The market volatility will help you reduce the cost per share over time.
The key to planning your investment is taking conservative estimates. If you underestimate and the stock over-delivers, it could give your financial plan some flexibility.
| Year | Invested Amount | Enbridge Share count @$55/share | Enbridge Share count | Enbridge Dividend per share (3% CAGR) | Enbridge dividend |
| 2024 | $3,000 | 55 | 55.0 | $3.65 | $200.75 |
| 2025 | $3,201 | 58 | 113 | $3.76 | $425.56 |
| 2026 | $3,426 | 62 | 175 | $3.87 | $679.50 |
| 2027 | $3,680 | 67 | 242 | $3.99 | $966.71 |
| 2028 | $3,967 | 72 | 315 | $4.11 | $1,292.00 |
| 2029 | $4,292 | 78 | 393 | $4.23 | $1,660.96 |
| 2030 | $4,661 | 85 | 477 | $4.36 | $2,080.13 |
| 2031 | $5,080 | 92 | 570 | $4.49 | $2,557.17 |
| 2032 | $5,557 | 101 | 671 | $4.62 | $3,101.06 |
| 2033 | $6,101 | 111 | 782 | $4.76 | $3,722.38 |
| 2034 | $6,722 | 122 | 904 | $4.91 | $4,433.60 |
Assuming your average cost per share is $55, a $3,000 investment in a year ($250 x 12 months) can buy you 55 shares of Enbridge. If the company increases its 2024 dividend by 3%, you will receive $3.65 per share, accumulating $200 in passive income from 55 shares.
Instead of taking a payout, you can use that money to accumulate more shares of Enbridge. The company has paused its dividend reinvestment plan, but you can buy its shares manually in your Tax-Free Savings Account (TFSA) without having to pay tax on dividend income.
In 2025, your $3,000 investment plus $200 dividend income can buy you 58 Enbridge shares at $55 per share price. In 10 years, you can accumulate 904 shares that could pay an estimated dividend per share of $4.91. I have rounded off the share count as you cannot buy half a share. At the end of 2034, you could earn $4,433 in yearly passive income.
A bullish scenario
The above estimates are conservative. In the best-case scenario, Enbridge could grow its dividend by 5% in a few years, and your average cost per share could fall to $50 or $52 if you do some opportunistic buying in a bear market and lock in a higher yield.
As I said before, every stock has its features. It is up to you how you use it.
