Investors seeking regular passive income could consider stocks of the companies that offer regular dividend payouts. Notably, a few dividend-paying stocks continue to pay and consistently increase their dividends regardless of the volatility in the stock market, making them a reliable source of income irrespective of economic cycles.
Fortunately, the TSX has several Dividend Aristocrats that have been paying and growing their dividends for decades. These companies have well-established businesses, a growing earnings base, and solid fundamentals that allow them to enhance their shareholders’ value in all market conditions.
In this context, Enbridge (TSX:ENB) emerges as a notable company to earn a steady income. Notably, this Canadian stock boasts an impressive track record of dividend payouts and offers a compelling and high yield. Let’s explore the reasons that make Enbridge a no-brainer dividend stock.
Enbridge: a no-brainer dividend stock
Investing in Enbridge stock will enable you to earn worry-free dividend income. The company owns a high-quality energy infrastructure business and transports oil and gas. Additionally, it has a growing portfolio of renewable energy assets and owns a regulated natural gas utility business.
Enbridge’s key role in the North American energy value chain, supported by diversified businesses, ensures a consistently high utilization rate of its assets. The high asset utilization rate enables the company to generate strong distributable cash flows (DCF) irrespective of economic situations and supports higher dividend payouts.
It’s worth noting that Enbridge has a solid track record of regular dividend payments spanning over 69 years. Notably, the company has not only maintained but also increased its dividend even in the face of economic downturns, which is a testament to its solid business model and resilient payouts.
In November 2023, Enbridge announced a 3.1% increase in its quarterly dividend. The increased dividend will be payable on March 1, 2024. Including the recent hike, Enbridge has extended its streak of dividend increases to 29 consecutive years. Further, Enbridge raised its dividend at a compound annual growth rate of 10% during that period, the highest among its peers.
Enbridge’s management highlighted that growing its dividend remains an important component of the company’s investor value proposition. This indicates the potential for ongoing dividend growth in the upcoming years. Additionally, the company’s targeted payout ratio of 60-70% of DCF is viable in the long run. These favourable factors reinforce my optimistic outlook and position Enbridge as a top stock for passive income. Furthermore, with a noteworthy yield of 7.5%, calculated based on its closing price of $49.06 on January 5, Enbridge remains an attractive investment.
The bottom line
Enbridge’s highly diversified cash flows and sustained investments in conventional and green energy assets position it well to capitalize on the energy demand and consistently deliver solid DCF per share. Further, its power-purchase agreements, regulated cost-of-service tolling frameworks, and low-risk commercial arrangements bode well for future growth.
Enbridge has secured an additional $7 billion in organic projects over the past year, significantly expanding its secured backlog to $25 billion. These multi-billion secured projects will enable the company to generate predictable growth in the years ahead, bolstering its ability to provide higher payouts. Additionally, Enbridge’s strategic acquisitions will likely boost its earnings and dividend payments.