This Passive-Income All-Star Just Increased its Dividend by 3%

This top TSX dividend stock has increased its payout annually for nearly three decades.

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Retirees and other Tax-Free Savings Account (TFSA) dividend investors are searching for quality high-yield stocks to add to their self-directed portfolios focused on generating steady passive income.

Enbridge

Enbridge (TSX:ENB) recently increased its dividend by more than 3%. This marks the 29th consecutive annual increase to the distribution.

Getting large oil pipeline projects approved and completed is very difficult these days. As a result, Enbridge is shifting its investment focus to new segments as it pivots to capitalize on emerging opportunities in the energy sector. The company purchased an oil export terminal in Texas for US$3 billion in 2021. Geopolitical uncertainties in core oil-producing regions are driving demand for North American oil.

The same situation is evident in the natural gas space. Europe and other buyers are seeking reliable supplies of liquified natural gas (LNG). Enbridge is expanding infrastructure to deliver natural gas to LNG plants in the United States and has also taken a stake in the new Woodfibre LNG facility being built in British Columbia.

Last year, Enbridge announced a deal to buy three natural gas utilities in the United States for US$14 billion. The addition of these businesses to the existing gas utility portfolio will make Enbridge the largest natural gas utility in North America. Cash flow from these businesses tends to be predictable and reliable. This should further diversify the revenue stream and help support long-term dividend growth.

Enbridge’s extensive natural gas transmission network already moves 20% of the natural gas used in the United States. The pipeline assets, in combination with the utilities, put Enbridge in a good position to take advantage of the anticipated transition to hydrogen fuel, which is distributed through natural gas infrastructure.

Enbridge has also expanded its renewable energy assets in recent years through large development projects and acquisitions.

Outlook

Enbridge expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow by 7-9% per year through 2026. Distributable cash flow is projected to expand by 3% annually over the same timeframe. This should provide support for ongoing dividend growth.

At the time of writing, Enbridge stock provides a dividend yield of 7.6%.

The bottom line on top stocks for passive income

Enbridge is a good example of a top TSX dividend-growth stock that offers investors a high yield. The shares aren’t as cheap as they were a few months ago, but Enbridge still deserves to be on your radar today for a TFSA portfolio targeting passive income.

As soon as interest rates begin to fall, this top dividend stock could catch a new tailwind.

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.

The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.

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