Investing in high-yield Canadian dividend stocks can help you earn solid passive income and reduce your investment’s payback period. Thankfully, the TSX has several such fundamentally strong companies that offer high yields and reliable dividends that keep on growing.
Against this backdrop, here is my top no-brainer, high-yield Canadian stock to buy in 2024 for worry-free passive income.
Source: Getty Images
Top High Yield Dividend Stock
Investors planning to invest in no-brainer, high-yield dividend stocks could consider Enbridge (TSX:ENB). Besides high yield, the durability of its payouts, management’s commitment towards enhancing shareholders’ returns through higher dividend payments, and visibility over future earnings and distributable cash flows (DCF) growth make it a worry-free stock for earning a steady income.
Enbridge is famous for consistently paying and increasing its dividends regardless of the economic and commodity cycles. For example, Enbridge has been paying dividends for over 69 years and increased dividends for 29 consecutive years. Furthermore, its dividend has grown at a compound annual growth rate of 10% in the last 29 years.
It’s worth highlighting that this energy infrastructure company has paid and even increased its dividend during the COVID-19 pandemic. This shows the resiliency of its dividend payouts. Enbridge pays a quarterly dividend of $0.915 per share, which translates into a high yield of 7.4% based on its closing price of $49.21 on June 7.
While Enbridge has a stellar dividend payment and growth history, let’s look at the factors suggesting it could continue enhancing its shareholders’ returns through higher payouts in the upcoming years.
Enbridge’s dividend could continue to grow
Enbridge is a key player in North America’s energy transportation sector, owning and operating top-tier energy infrastructure assets. As it plays a significant role in the oil and gas movement, Enbridge’s assets enjoy high utilization rates, which bolster its earnings, distributable cash flow (DCF) and, consequently, its dividend payouts.
Enbridge has a highly diversified revenue stream. This diversification provides a layer of stability to its cash flows, mitigating risks associated with market volatility. Moreover, Enbridge secures its revenue through power-purchase agreements and long-term contracts. Further, it effectively manages volume and price risks. This approach ensures a steady cash flow, even amidst fluctuating energy markets.
Enbridge employs a dual growth strategy, investing in conventional and renewable energy assets. This balanced approach positions the company to capitalize on the evolving energy landscape and growing demand for energy infrastructure.
In addition to organic growth, Enbridge has a history of strategic acquisitions that enhance its cash flows and overall market position. These acquisitions expand Enbridge’s asset base and contribute to long-term stability and growth.
Enbridge’s management views dividend growth as a fundamental component of its value proposition to investors. Thus, the company could continue to increase its dividends in the upcoming years.
Notably, Enbridge’s earnings per share (EPS) and DCF per share are projected to increase at a mid-single-digit rate in the long term. These forecasts suggest that Enbridge could continue to grow its dividend at a low to mid-single-digit rate.
Bottom line
In summary, Enbridge’s high-quality assets, diversified revenue base, and consistent growth in earnings and distributable cash flow (DCF) per share make it an excellent high-yield investment. The company’s management is committed to enhancing shareholder value, and Enbridge is well-positioned to increase returns through higher dividend payments. With a targeted payout ratio of 60 to 70% of DCF, its payments are sustainable in the long run, reinforcing Enbridge’s appeal as a reliable and high-yield income-generating stock.
