The stock market is an incredible place filled with numerous opportunities. Investors have tonnes of choice when it comes to buying stock in companies across different industries. You can also buy stocks of all sizes, from market caps of less than $100 million to a massive $100 billion giant like Enbridge (TSX:ENB).
The reason having so much choice is so crucial is that different stocks offer different opportunities. A small-cap tech stock, for example, will likely be a high-risk, high-reward stock that can offer significant growth potential.
On the flip side, a massive large-cap telecom stock may not offer nearly as much growth potential, but it will be a lot safer of a stock and likely pay an attractive dividend.
These differences allow investors to build a portfolio that suits their personal preferences and risk profile. And because different stocks offer exposure to all kinds of industries, it also allows Canadians to mitigate risk by diversifying their investments.
There are many different qualities to look for when picking stocks to buy and hold for the long haul. Ideally, you want a dominant company in a stable or growing industry. You also want to find stocks that have significant competitive advantages and a track record of consistent profitability.
These are many of the same qualities to look for when buying a high-quality dividend stock. It’s also the reason why Enbridge stock is a no-brainer investment if you’re looking to boost your passive income.
Why is Enbridge one of the top dividend stocks on the market?
Several reasons make Enbridge one of the best stocks you can buy for dividend income. But first, let’s start with its industry and why Enbridge is so important to our economy.
Energy is one of the most important industries in the economy. Without energy the economy would cease to a halt. The problem is energy prices can be highly volatile, making many energy stocks higher-risk investments.
In Enbridge’s case, though, while it is still exposed to the performance of the energy industry, it’s much more stable. Furthermore, its portfolio is considerably diversified, which helps to make its cash flow generation more robust.
Its primary objective is to serve the energy industry, and it operates the world’s longest crude oil and liquids transporting system with over 28,000 km of active pipeline across North America. That’s one of the reasons it has such impressive competitive advantages.
In addition to its pipeline businesses, though, Enbridge stock also owns a massive utility business, one of the most defensive industries there is. Furthermore, it also has a rapidly growing green energy portfolio as the stock continues to invest in the future of the energy industry.
Over a quarter century of dividend growth
Enbridge’s impressive business operations allow it to earn significant cash flow year in and year out. And while its cash flow and earnings can fluctuate based on the underlying economy and performance of the energy industry, Enbridge stock has proven it can weather downturns, particularly with its 27-year dividend-growth streak.
Having increased the dividend for 27 consecutive years allows Enbridge to offer one of the highest and safest yields on the TSX, but it also shows the resiliency of Enbridge’s operations throughout different economic environments.
From the dot-com bubble to the Great Recession in 2008 and 2009, Enbridge has continued to execute well, generate billions in cash flow, and consistently increase the dividend.
In fact, in just the last five years, the annual dividend has increased by over 24%, or a compounded annual growth rate of 4.4%. So, if you’re buying Enbridge for passive income, it’s as if you’re getting a raise every year. Not to mention that with the stock trading off its highs, the dividend yield today is roughly 7.8%.
Therefore, if you’re looking for a high-quality and reliable dividend stock to buy and hold for the long haul, there’s a reason why Enbridge is such a popular core portfolio stock among Canadian investors.
