Creating a stable source of passive income helps you accelerate your retirement plans. One low-cost way to begin a recurring and reliable passive-income stream is by purchasing quality dividend stocks and holding them over time.
The best dividend-paying companies generate stable cash flows across business cycles. Additionally, due to an expanding earnings base, these companies are positioned to raise dividends annually, increasing the yield-at-cost significantly.
At first it may seem you would need a substantial amount of capital to earn dividends. But did you know you can generate $1,500 in annual dividend income by investing just $100 per week? Let’s see how.
Invest $100 per week in dividend stocks
Investors should allocate $100 each week and buy shares of dividend-paying companies equipped with strong fundamentals. So, if you invest $100 a week, your equity portfolio would balloon to $5,200 in a year and $26,000 in five years. To earn $1,500 in annual dividend income, you would need to find stocks offering shareholders an average yield of 5.8%.
There are plenty of TSX dividend stocks that offer you a yield of 6%, but just a handful of them are solid long-term investments. Here are two such TSX stocks that income-seeking investors can consider buying right now.
Enbridge stock
Energy infrastructure giant Enbridge (TSX:ENB) should be on top of your shopping list due to its tasty dividend yield of 7.55%. In the last 29 years, Enbridge has raised its dividends by roughly 10% annually, which is exceptional for a cyclical company.
Enbridge generates predictable cash flows due to its diversified portfolio of cash-generating assets. It operates low-risk utility assets that include gas transmission and storage. Around 98% of its earnings are derived from fixed-rate contracts, while 95% of the customers have investment-grade credit ratings.
With a dividend payout ratio of less than 70%, Enbridge has the flexibility to target accretive acquisitions, lower balance sheet debt, and fund new projects, all of which should improve cash flow per share and support dividend hikes.
Enbridge ended 2023 with $25 billion of commercially secured capital projects, providing shareholders with enough revenue and earnings visibility. It expects to invest between $6 billion and $7 billion each year to build these projects which should enter commercial service through 2028.
Brookfield Infrastructure Partners stock
Down 30% from all-time highs, Brookfield Infrastructure Partners (TSX:BIP.UN) stock offers you a dividend yield of 5.6%. Despite an uncertain environment in 2023, its funds from operations (FFO) totalled $2.3 billion, or $2.95 per share, last year. Its FFO grew by 10% year over year, leading to a 6% dividend hike. The Canadian infra heavyweight has now increased dividends for 15 consecutive years.
- We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Enbridge made the list!
Moreover, BIP continues to target accretive acquisitions, driving future cash flows higher. Its recent acquisitions of Triton and two data center platforms allowed the company to grow FFO by 17% year over year in the fourth quarter of 2023.
BIP stock is priced at 12 times trailing earnings, which is really cheap given its stellar growth estimates.
The Foolish takeaway
Enbridge and Brookfield Infrastructure Partners are just two examples of quality dividend stocks. You should identify other beaten-down, blue-chip stocks that offer you a high yield and diversify your dividend portfolio.
