When it comes to buying high-quality dividend stocks in Canada, especially ones that you can hold with confidence for years, there’s no question that Enbridge (TSX:ENB), the massive energy infrastructure stock, is one of the very best.
For a dividend stock to be considered high quality and one of the best, it needs to check off several criteria, with the business model being one of the most crucial.
Typically, the best dividend stocks are either highly defensive, possess significant competitive advantages over their competitors, or both. This is where Enbridge shines. Its operations are essential to the economy, highly defensive, and generally predictable. Plus, the pipeline industry has massive barriers to entry, giving Enbridge a tonne of competitive advantages over its peers.
Furthermore, a track record of consistent profitability is vital to show investors that the passive income it generates is safe and reliable.
That’s why utility stocks are often considered some of the best dividend stocks you can buy, as their revenue and earnings are far more predictable than those in nearly any other industry. The more stable a company’s revenue, costs, and earnings, the more reliable its dividend will likely be and the less volatile the stock.
Why is the energy infrastructure stock one of the best to buy for passive income?
Enbridge is one of the best dividend stocks to buy now because it excels in many of the areas listed above. It operates a massive business that spans oil and gas transportation, utility operations, an energy storage business, and a rapidly growing renewable energy portfolio.
Moreover, it owns a tonne of long-life assets, such as pipelines, which generate cash flow consistently for decades with minimal maintenance required. Therefore, with roughly $180 billion in assets, many of which are long-life, it’s clear why Enbridge is a powerhouse in generating significant cash flow.
This robust cash flow enables Enbridge not only to invest in future growth but also to return substantial capital to its investors. Thus, it offers a massive dividend and an attractive yield of roughly 7.1%, not to mention its 27-year streak of consecutive dividend increases—one of the longest streaks in Canada.
So, as you consider the dividends Enbridge is set to pay this year, remember these factors that make it a standout choice for anyone seeking stable, long-term passive income.
How much will Enbridge pay in dividends this year?
After yet another dividend increase last year, Enbridge is now paying $3.66 per share in dividends this year. That means if you own 100 shares of Enbridge (a roughly $5,100 position), you could generate $366 in passive income this year or more than $90 each quarter.
Furthermore, it’s worth noting that typically, toward the end of the year, Enbridge announces a dividend increase that will begin in the following year. So, unless something drastic happens with its business operations, the economy or both, Enbridge should continue to extend its consecutive dividend-growth streak.
Over the last five years, its dividend has increased at a compounded annual growth rate (CAGR) of roughly 4.4%, giving investors a good idea of what to expect this year. According to consensus, analysts are estimating a roughly 3% increase in the dividend heading into next year.
In total, Enbridge will pay more than $7.78 billion in dividends this year, which may sound like a lot. However, it’s well within its guidance range.
Heading into 2024, Enbridge said it expects to earn distributable cash flow (DCF) per share of $5.40 to $5.80, easily exceeding the $3.66 per share in dividend payments.
Therefore, in total figures, Enbridge estimates it will earn more than $11.5 billion in DCF this year, showing exactly how safe and reliable the dividend is, as well as how much cash it has leftover to invest in future growth or pay down some of its debt.
So, if you’re looking for a high-quality and reliable passive-income generator to buy now and hold in your portfolio for years to come, there’s no question that Enbridge is one of the top dividend stocks in Canada.
