Invest $7,000 in This Dividend Stock for $441 in Passive Income

Top TSX dividend stocks with attractive yields offer a steady passive income while adding stability to your portfolio. By investing in TSX stocks with a history of reliable dividend payments, a growing earnings base, solid fundamentals, and visibility over future payouts, you can build a portfolio that generates dependable income regardless of market conditions.

Moreover, investors can optimize their passive income by leveraging the TFSA (Tax-Free Savings Account). For instance, when you hold dividend-paying stocks within a TFSA, your earnings remain untaxed, thus maximizing long-term returns.

With this backdrop, let’s look at a top Canadian stock that could generate $441/year in passive income by investing $7,000, the TFSA contribution limit for 2024.

The top dividend stock with over 6% yield

For investors seeking worry-free passive income, Enbridge (TSX:ENB) could be a smart choice due to its stability of payouts and attractive yield. With a legacy of consistent payouts spanning seven decades, Enbridge is among the best Canadian dividend stocks. Even more remarkable is the company’s streak of 30 consecutive years of dividend increases, a reflection of its management’s commitment to enhancing shareholder returns.

Enbridge is a Dividend Aristocrat, and its ability to maintain and grow its dividends, even during challenging economic periods, sets it apart from most energy stocks. Notably, during the COVID-19 pandemic—a time when many energy companies were forced to reduce or suspend dividend payments—Enbridge upheld its dividend payouts and continued to raise them. This resilience shows the company’s robust financial health and the stability of its cash flows, even in volatile market conditions.

Currently, Enbridge offers a quarterly dividend of $0.943 per share, translating to an attractive annualized yield of over 6%. For income-focused investors, this high yield, combined with the company’s strong track record of dividend growth, makes Enbridge a top-income stock.

Enbridge to maintain dividend-growth trajectory

Enbridge is well-positioned to sustain and grow its dividend thanks to its diverse revenue base and high-quality assets, which witness a higher utilization rate. The company’s expansive pipeline network, connecting top supply and demand regions, operates at high capacity, generating steady earnings and distributable cash flow (DCF) and supporting its consistent dividend-growth strategy.

Further, Enbridge’s long-term contracts, power-purchase agreements (PPAs), and regulated tolling frameworks provide stability and help the company maintain reliable growth. In addition, Enbridge continues to grow its traditional and renewable energy assets. The company is positioning itself well to capitalize on future energy demand by broadening its asset base. The company’s strategic acquisitions bolster its low-risk earnings base. Notably, the acquisition of three premier gas utilities enhances its cash flow and will likely drive long-term growth.

Enbridge plans to bring multi-billion-dollar secured growth projects online over the next few years. These projects will significantly expand its earnings base and support further dividend increases. The company anticipates mid-single-digit growth in earnings per share (EPS) and DCF per share in the long term. Moreover, its dividend growth will likely align with its medium-term cash flow growth. By maintaining a payout ratio target of 60-70% of its DCF, Enbridge’s high yield is well-protected through its solid earnings base and a sustainable dividend payout target of 60-70% of its DCF.

Earn $464 dividend income via Enbridge stock

Enbridge’s proven track record of consistent dividends, resilient business model, growing DCF, and visibility over future earnings and dividend growth make it a no-brainer passive-income stock.

The table shows that a $7,000 investment in Enbridge shares via TFSA could generate tax-free quarterly income of $110.33, totalling $441.32 annually.