Investing in dividend stocks with attractive yields offers a reliable path to generating passive income over time. By focusing on stocks with solid fundamentals and a consistent dividend payment history, investors can secure steady income streams even amidst market fluctuations.
It’s worth noting that utilizing a TFSA (Tax-Free Savings Account) enhances this strategy significantly. In a TFSA, dividends remain untaxed, maximizing the returns from investments.
With this background, let’s look at a stock that could help generate $464/year in passive income with a $7,000 investment, which is the TFSA contribution limit for 2024.
A dividend powerhouse for passive income
When it comes to safe passive income, Enbridge (TSX:ENB) is a dividend powerhouse with a proven record of stellar payouts. This TSX stock has been paying and increasing dividends for decades. Moreover, it offers a sustainable and high yield.
The energy infrastructure company boasts a dividend-paying streak that spans nearly seven decades. Even more impressive is its consistent track record of dividend growth, having raised its payout for 29 consecutive years. This long-term commitment to rewarding shareholders makes Enbridge stand out in the crowded dividend space.
The energy company has maintained and even increased its dividend during tough economic times. During the COVID-19 pandemic, when many energy companies were forced to slash or suspend dividend payments, Enbridge bucked the trend. The company maintained its payout and continued to increase it, demonstrating the resilience of its cash flows and robust financial health.
Enbridge offers a quarterly dividend of $0.915, which translates to an impressive yield of 6.7% based on its closing price of $54.98 on September 12.
Enbridge’s dividend growth outlook
Enbridge is in a solid position to keep raising its dividend thanks to its diverse revenue sources and high-quality assets. The company’s extensive network of pipelines, which connect key supply and demand regions, operates at a high capacity. This helps Enbridge generate steady earnings and distributable cash flow (DCF), which are crucial for future dividend increases.
Additionally, Enbridge benefits from long-term contracts like power-purchase agreements (PPAs) and regulated tolling frameworks. These agreements provide stability and ensure a steady income stream, even during uncertain economic times. As a result, Enbridge can maintain reliable earnings growth.
The company is also expanding its presence in traditional and renewable energy sectors. This diversification spreads out its revenue streams and helps meet future energy demands. Enbridge’s focus on strategic acquisitions and expanding its low-risk earnings base further strengthens its financial outlook and ability to grow its dividends.
Looking ahead, Enbridge plans to bring $24 billion worth of capital projects into service in the coming years, which will expand its earnings base and support dividend increases. The company expects mid-single-digit growth in earnings per share (EPS) and DCF per share, allowing for similar dividend growth. With a payout ratio target of 60-70% of its DCF, Enbridge’s dividend growth looks sustainable for the future.
Bottom line
Enbridge is a no-brainer stock for passive income seekers. With a stellar record of dividend payments and visibility over future earnings growth, it’s well-positioned to keep delivering value to shareholders.
The table below shows that if you invest $7,000 in Enbridge stock, you could earn around $116.21 every quarter, which adds up to $464.82 a year.
| Company | Recent Price | Number of Shares | Dividend | Total Payout | Frequency |
| Enbridge | $54.98 | 127 | $0.915 | $116.21 | Quarterly |
