1 Top Dividend Stock to Buy With $500

If you are looking for a place to park $500 for the long run to generate significant returns, consider adding this top Canadian dividend stock to your portfolio.

| More on:
Canadian Dollars

Image source: Getty Images

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand using ATM
Dividend Stocks

Should Bank of Nova Scotia or Enbridge Stock Be on Your Buy List Today?

These TSX dividend stocks trade way below their 2022 highs. Is one now undervalued?

Read more »

A meter measures energy use.
Dividend Stocks

Here’s Why Canadian Utilities Is a No-Brainer Dividend Stock

Canadian Utilities stock is down 23% in the last year. Even if it wasn’t down, it is a dividend stock…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Got $5,000? Buy and Hold These 3 Value Stocks for Years

These essential and valuable value stocks are the perfect addition to any portfolio, especially if you have $5,000 you want…

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Magnificent Ultra-High-Yield Dividend Stocks That Are Screaming Buys in April

High yield stocks like BCE (TSX:BCE) can add a lot of income to your portfolio.

Read more »

grow money, wealth build
Dividend Stocks

1 Growth Stock Down 24% to Buy Right Now

With this impressive growth stock trading more than 20% off its high, it's the perfect stock to buy right now…

Read more »

Dividend Stocks

What Should Investors Watch in Aecon Stock’s Earnings Report?

Aecon (TSX:ARE) stock has earnings coming out this week, and after disappointing fourth-quarter results, this is what investors should watch.

Read more »

Freight Train
Dividend Stocks

CNR Stock: Can the Top Stock Keep it Up?

CNR (TSX:CNR) stock has had a pretty crazy last few years, but after a strong fourth quarter, can the top…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks Ready for Dividend Hikes in 2024

These top TSX dividend stocks should boost their distributions this year.

Read more »