High-yield dividend stocks are top investments for earning passive income. Moreover, by focusing on companies with strong fundamentals and a solid track record of dividend payments, investors can secure a relatively safe income stream, even amid market volatility.
It’s worth noting that several Canadian stocks are known for paying and increasing their dividends in all market conditions. Moreover, they have a growing earnings base and sustainable payout ratio, making them a reliable source of income.
But before proceeding, it’s essential to acknowledge that all investments involve some level of risk, and there is no such thing as a completely safe income-generating investment.
Against this background, let’s look at a TSX stock offering a well-protected and high yield of 6.9%. Investors can rely on this Canadian corporation to earn safe income.
Top option for safe income
While the TSX has several stocks that have been paying and increasing dividends for decades, Enbridge (TSX:ENB) stands out for its stellar dividend payments and growth history, high yield, and sustainable payouts.
The energy company, which transports and distributes oil and natural gas, has paid dividends for about seven decades and has consistently increased its dividends for nearly three decades (29 years, to be exact).
Notably, Enbridge sustained and even increased its dividend during the COVID-19 pandemic, a period when many energy companies either suspended or reduced their payouts. This highlights the resilience of Enbridge’s dividend and its ability to navigate challenging economic conditions.
Currently, Enbridge pays a quarterly dividend of $0.915 per share, offering a robust yield of 6.7%, based on its closing price of $54.60 as of September 4.
Why is Enbridge a safe dividend income stock?
Enbridge has an impressive dividend payment and growth history. Moreover, the company is well-positioned to reward its shareholders with higher payouts in the coming years. Enbridge’s extensive network of liquid pipelines connects key supply basins and major demand centers. Thus, its assets witness high utilization, which drives its consistent earnings and distributable cash flow (DCF) growth.
Moreover, Enbridge’s assets are backed with power-purchase agreements (PPAs), long-term contracts, and regulated cost-of-service tolling frameworks. These arrangements add stability and ensure steady earnings growth even amid macro uncertainty.
The company is steadily expanding its conventional and renewable energy assets. This strategy positions it well to capitalize on future energy demand and diversify its income streams. Further, Enbridge also focuses on strategic acquisitions, which will likely accelerate its growth rate.
Enbridge is poised to benefit from its robust, secured capital projects, valued at approximately $24 billion. Further, the company is generating low-risk earnings by focusing on low-capital-intensity projects and regulated utility investments.
Enbridge is expected to achieve mid-single-digit growth in earnings per share and DCF in the long run. This growth should support similar increases in its dividend during the same period. Moreover, with a payout ratio of 60-70% of DCF, the dividend is on solid footing.
Bottom line
For investors seeking safe dividend income, Enbridge is an attractive option. Its strong track record of dividend payments, resilient business model, and expanding earnings base position it well to deliver consistent returns to shareholders over time.
