Dividend investing is one of the best ways to generate substantial long-term returns on your investment in the stock market. When you invest in dividend stocks, you get returns through capital gains and quarterly or monthly payouts distributed by the company from a share of their revenues.
It means that the value of your investment can grow alongside additional cash lining your account balance through shareholder dividends.
Dividend investing provides predictable and reliable passive income, making these companies compelling holdings in their self-directed investment portfolios. The TSX boasts several high-quality stocks that have uninterruptedly paid and increased dividends for several years. Today,
I will discuss Enbridge (TSX:ENB), a Canadian Dividend Aristocrat from the energy sector that has hiked its dividend payouts for almost three decades.
Enbridge
Enbridge does not have the longest streak of growing shareholder dividends. That mantle belongs to Canadian Utilities stock for its 50-year dividend-growth streak. Enbridge has paid its shareholders their dividends for the last 69 years and increased its payouts for the last 29 of them. Over almost three decades, it has maintained an impressive 10% annualized dividend-growth rate.
As of this writing, Enbridge stock trades for $47.14 per share. At current levels, it pays its investors their shareholder dividends at a higher-than-usual 7.76% dividend yield. In comparison, Canadian Utilities stock boasts a 5.89% dividend yield. However, higher-yielding dividends are not the only factor you must consider.
When investing in a dividend stock, you must do your due diligence to determine whether the underlying company has financials solid enough to support those payouts.
Is Enbridge stock reliable?
Enbridge is a $100.20 billion market capitalization Canadian multinational pipeline and energy company. Headquartered in Calgary, it owns and operates one of the world’s most complex and extensive energy pipeline networks.
It transports a significant portion of crude oil, natural gas, and natural gas liquids produced and consumed in North America. Enbridge also has a growing renewable energy business, touted to prepare the company for a solid future as the energy industry goes green.
Presently, its key role in the North American energy industry gives it a great defensive appeal. The company charges based on the volume of commodities it transports, protecting its financials from volatility in commodity prices.
The high utilization of its network drives its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). In turn, the company generates diversified cash flows that are healthy enough to fund the growth of its dividends and capital projects in the renewable energy space.
Foolish takeaway
Enbridge has a $25 billion backlog of growth projects set to come into service in the coming years. Alongside its strategic acquisitions, it indicates substantial growth potential for several more years.
The high-interest-rate environment to control red-hot inflation has increased borrowing costs, temporarily weighing on its financials and dragging its share prices to lower levels.
While some might see lower share prices as concerning, long-term investors might look at it as an opportunity. Due to lower share prices, its dividend yields are much higher than usual. It can be a chance to lock in higher-yielding dividends before a recovery sends its share prices soaring again.
