The TSX has many dividend-paying companies with long histories of stable payments, even during economic downturns. This provides predictability and reliability for investors seeking passive income, making these companies a compelling investment to earn worry-free passive income.
The TSX has several Canadian stocks like Canadian Utilities (TSX:CU) and Fortis (TSX:FTS) that have uninterruptedly paid and increased dividends for five decades. This makes them compelling investments to earn worry-free passive income. However, I’ll focus on a dependable income stock that has grown its dividend for nearly three decades. Further, it offers a higher yield than Canadian Utilities and Fortis to beat inflation.
Investors can earn $780/year by putting $10,000 in this amazing dividend stock.
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The top stock for passive income
Speaking of dependable passive-income stocks offering high yield, Enbridge (TSX:ENB) tops my mind. Enbridge specializes in energy transportation and distribution. It operates through five business segments: Liquids Pipelines, Gas Distribution and Storage, Renewable Power Generation, Gas Transmission and Midstream, and Energy Services.
Enbridge is a Dividend Aristocrat which has paid dividends for over 69 years. Further, in November 2023, this oil and gas transporter increased its quarterly dividend by 3.1% to $0.915, marking the 29th consecutive year of dividend increases. Over this period, Enbridge has maintained an impressive average annualized dividend-growth rate of 10%.
Enbridge currently sports a compelling yield of 7.8% based on its closing price of $47.19 on March 1. In comparison, Canadian Utilities and Fortis offer yields of 5.8% and 4.5%, respectively.
Why rely on Enbridge?
While the company has a stellar dividend payment and growth history, its management sees growing dividends as a crucial aspect of its investor value proposition. This suggests that shareholders can expect the company to enhance their returns through higher dividend payments in the coming years.
Notably, Enbridge plays a key role in the North American energy value chain, resulting in high utilization of its assets. This, in turn, drives its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Further, Enbridge’s highly diversified cash flows and continued investments in conventional and clean energy projects position it well to capitalize on the energy demand and deliver solid distributable cash flow (DCF) per share. In addition, the company’s power-purchase agreements and regulated cost-of-service tolling frameworks also lay a strong foundation for future earnings growth, supporting higher payouts.
Enbridge has a secured backlog of $25 billion of growth projects. These projects will come into service in the upcoming years and drive its adjusted EBITDA and dividend payments. Also, its strategic acquisitions and embedded revenue escalators are a good indication of future growth. Enbridge maintains a target payout ratio of 60-70% of DCF, ensuring its dividends are well-covered and sustainable in the long run.
The bottom line
Enbridge is a reliable stock to earn passive income in all market conditions. Its commitment to return cash to shareholders, sustainable payouts, and high yield support my optimistic outlook.
Based on the current yield, income investors can make an annual passive income of $780 with a $10,000 investment. Further, investors can expect this income to increase in subsequent years.
