Investors seeking passive income can enjoy excellent returns by investing in the stock market and creating a portfolio of dividend stocks. Dividend investing, especially with the right combination of stocks, can be an excellent way to generate good returns on your investment.
The TSX has no shortage of high-yielding dividend stocks. However, picking dividend stocks for your portfolio only based on high yields is not the smartest decision.
When investing in dividend stocks, it is important to look beyond the dividend yield they offer. To be a good investment, the stock must be capable of distributing those payouts for years. Remember, dividends are not a guarantee. Rather, these are cash distributions that companies reward their investors with when they have strong cash flows and solid fundamentals to support the payouts.
As such, the TSX boasts several companies that have paid and raised dividends despite volatile market conditions over the years. While the energy industry is no stranger to volatility and even dividend cuts, some companies have fared better than others in that regard. Today, we will discuss a high-yielding Canadian energy stock that pays dividends and a reliable track record of growing payouts.
Enbridge
Enbridge (TSX:ENB) is a $121.85 billion giant in the Canadian energy sector. The multinational energy and pipeline company is headquartered in Calgary. It owns and operates pipelines throughout Canada and the U.S., transporting crude oil, natural gas, and natural gas liquids in North America.
Enbridge has a growing presence in the renewable energy industry as it continues to grow its portfolio of onshore and offshore wind projects. Enbridge also owns and operates a regulated natural gas utility and Canada’s largest natural gas distribution company.
As of this writing, Enbridge stock trades for $55.96 per share. It pays its investors $0.915 per share in quarterly dividends, which reflect a juicy 6.54% dividend yield. ENB stock has a consistent record of paying dividends and growing them over the years.
The company has been paying its shareholders their dividends for over 70 years and has grown its payouts at a compound annual growth rate (CAGR) of around 10% for almost 30 of those years.
For income-seeking investors, Enbridge’s high-yielding dividends and dependably growing payouts make it a solid investment. The company has grown its payouts even in challenging market conditions.
Due to volatility in commodity prices, energy stocks tend to fluctuate in share prices a lot. However, Enbridge stands out due to its business model. Rather than earning revenue based on the price of underlying commodities, it generates revenue based on the volume it transports.
This shields the company from changing oil and natural gas prices. Moreover, Enbridge has long-term contractual arrangements that make its cash flows even stronger during harsh economic environments.
Foolish takeaway
As the world slowly shifts to greener energy, Enbridge is also future-proofing itself by diversifying into renewable energy assets. Between its long-term contractual arrangements, strong balance sheet, stable dividends, and long-term growth potential, Enbridge stock can be an excellent addition to any self-directed investment portfolio right now.
