There’s no question that the best and most straightforward way to be a successful investor is to find the highest-quality stocks on the TSX to buy and hold for the long term.
By ensuring the stocks you buy are amongst the best in the country, you can allow your portfolio to benefit from both the stability and growth of well-established companies.
These top-tier stocks often have strong financials, competitive advantages, and a track record of consistent performance, and usually pay attractive dividends.
Therefore, holding these stocks for the long haul allows them to grow and compound over time, taking advantage of both their capital appreciation and the passive income that they generate.
This strategy not only reduces the need for constant monitoring and trading, which also allows you to reduce transaction costs and the emotional stress of frequent market fluctuations, but it also aligns your investments with the growth of the economy, ultimately increasing your chances of achieving significant returns.
That’s why one of my top core holdings is Enbridge (TSX:ENB), one of the best TSX stocks to buy and hold for decades.
Enbridge’s operations are well-diversified and essential to the economy
One of the most important reasons why Enbridge is such a reliable stock is that it’s a massive company with significant competitive advantages and well-diversified operations that are essential.
For example, the $115 billion stock has four core businesses. Its liquids pipelines and natural gas pipelines businesses are two of its largest and primarily what it’s known for. Together, they move about 30% of the crude oil produced in North America and transport nearly 20% of the natural gas consumed in the U.S.
Furthermore, despite being an infrastructure giant and an essential company in the North American economy, Enbridge also recognizes the shift to cleaner energy and has been an early investor in renewable energy with a growing offshore wind portfolio.
Finally, its gas utilities and storage business operates the largest natural gas utility by volume in North America.
Together, these businesses give Enbridge a tonne of diversification. In addition, each is reliable and recession-resistant on its own, making Enbridge one of the best TSX stocks to buy and hold for years.
Furthermore, they all generate significant cash flow for Enbridge, which is why it can pay out an attractive dividend and consistently increase that dividend each year.
Enbridge is one of the top TSX stocks to buy
Another significant benefit of Enbridge’s operations is the long-life assets it owns, such as pipelines and storage facilities. These require relatively low maintenance capex each year, allowing them to generate substantial cash flow.
This is what makes Enbridge one of the best dividend growth stocks on the TSX and a top investment to buy and hold long term.
The substantial cash flow that Enbridge generates allows it to increase the dividend it pays to investors each year alongside the cash it uses to invest in future growth, which helps ensure continued dividend increases for years to come.
For example, Enbridge has increased its dividend for 27 consecutive years now, and in just the last five years the dividend has grown by more than 24%, or a compound annual growth rate of 4.4%.
So not only does it offer a compelling yield today of roughly 6.9%, but it continues to increase the passive income it generates for investors yearly, showing why it’s one of the top TSX stocks to buy and hold for decades.
The stock continues to execute well and demonstrate its resiliency. In fact, analysts estimate that its earnings before interest, taxes, depreciation and amortization (EBITDA) will climb by 10.9% this year and another 5.9% next year.
Furthermore, with its EBITDA expected to climb significantly over the coming quarters, its forward enterprise value to EBITDA (EV/EBITDA) ratio is now just 11.4 times, below its 5- and 10-year averages of 12.1 and 13 times, respectively.
Therefore, while this impressive dividend growth stock trades at a reasonable valuation, it’s easily one of the best companies on the TSX to buy and hold for decades.
