Invest $10,000, Create $598 in Passive Income From This Dividend Stock (or More!)

If you’re looking to grow your passive income with a reliable Canadian dividend stock, Enbridge (TSX:ENB) should be on your radar. With a strong track record of dividend growth, stable cash flows, and an essential role in North America’s energy infrastructure, Enbridge is an excellent choice for long-term investors. Investing $10,000 in this stock today could generate nearly $600 annually in passive income, making it a compelling option for those seeking financial stability and steady returns.

Why Enbridge?

Enbridge is one of North America’s largest energy infrastructure companies, owning and operating extensive crude oil and natural gas pipeline networks. With over 38,000 kilometres of pipelines across Canada and the U.S., the dividend stock plays a vital role in transporting energy safely and efficiently.

What makes Enbridge particularly attractive for passive-income investors is its long history of dividend growth. The dividend stock has increased its dividend annually for nearly 30 years, demonstrating a commitment to returning cash to shareholders. Its current dividend yield of 5.98% provides a generous and sustainable income stream, even during periods of market volatility, not to mention returns.

Into earnings

Enbridge’s recent earnings highlight its financial strength and resilience. In the third quarter of 2024, the company reported GAAP (generally accepted accounting principles) earnings of $1.3 billion, or $0.59 per share, a significant increase from $0.5 billion, or $0.26 per share, in the same period last year. Adjusted earnings came in at $1.2 billion, or $0.55 per share, demonstrating stability despite fluctuating energy prices. The earnings boost was largely driven by newly acquired natural gas assets in the U.S. as well as organic growth from its core pipeline operations.

Revenue also showed strong performance, reaching $48.55 billion over the trailing 12 months. The dividend stock’s operating cash flow of $12.75 billion ensures that its dividend payments remain well-supported, even as it invests in future projects.

Beyond its stable dividends, Enbridge has a promising future. The dividend stock is investing $7 billion in capital projects for 2025, focusing on natural gas infrastructure, offshore wind, and carbon capture technology. Moreover, demand for natural gas continues to rise, especially as countries seek energy security and reduce reliance on coal. Enbridge’s recent acquisition of three U.S. natural gas utilities strengthens its position in this growing sector. These acquisitions are expected to add over $2 billion in annual revenue, further reinforcing the company’s cash flow and dividend potential.

Is the dividend safe?

One concern investors often have is whether a company’s dividend is sustainable. In Enbridge’s case, the payout ratio currently sits at 123.55%, which may seem high at first glance. However, this figure is based on GAAP earnings, not distributable cash flow (DCF), a more accurate measure for pipeline companies. When assessed through DCF, Enbridge’s dividend remains well within a manageable range.

Yet no investment is without risk, and Enbridge is no exception. While the dividend stock benefits from a strong market position, it is exposed to regulatory challenges, interest rate fluctuations, and energy price volatility. Pipeline projects often face legal hurdles and delays, which can impact future earnings. Additionally, with $95.58 billion in total debt, Enbridge carries a significant debt load, though its stable cash flows help manage interest payments.

Foolish takeaway

Despite the risks, Enbridge remains one of Canada’s most reliable dividend stocks. With a near 6% dividend yield, a decades-long history of dividend growth, and strong earnings backed by essential energy infrastructure, it’s a solid choice for investors looking to generate steady passive income. So how much could you earn?

For those looking to invest $10,000, Enbridge offers an excellent balance of high yield, growth potential, and financial stability. Its ability to navigate market fluctuations while delivering reliable returns makes it a compelling option for income-focused investors.