For investors looking to put some capital to work in the often-overlooked TSX, there happen to be a number of great options to consider. For those looking for top dividend stocks to buy, the good news is that the Canadian market is chock full of companies with solid balance sheets that have paid yields in excess of government bonds for a very long time.
One company I continue to come back to as a long-term winner in the Canadian market is Enbridge (TSX: ENB). The pipeline operator provides investors with exposure to some of the most robust cash flows in the energy sector, with a yield that’s very attractive. Indeed, try finding a stock that yields 6.3% with similar underlying fundamentals to Enbridge.
With that in mind, here’s why I think Enbridge could be the top Canadian dividend stock yield-hungry investors may want to consider right now.
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Solid business model and fundamentals
I think most investing cases regarding dividend stocks revolve around a given company’s business model and fundamentals. On those fronts, Enbridge certainly stands out as a potential long-term winner.
The energy infrastructure company operates a vast network of pipelines, which ultimately service around 40% of North American crude oil and natural gas. This incredibly strong underlying business mode provides equally stable cash flows. With revenue growing 22% year over year in 2024 and a solid profit margin of more than 13%, Enbridge is certainly well-positioned to continue to grow. That goes double if energy demand continues to increase at its historical rate, though the market is clearly mixed on this front.
In a way, Enbridge’s valuation is influenced by oil prices, but not to a great degree. Oil production levels are a function of oil prices and, therefore, how much oil and gas ultimately gets transported. However, over the long term, most experts agree that energy usage will continue to increase.
Thus, Enbridge’s recent revenue and earnings growth may not continue at its current pace. But I’d put my money on the idea that this company should see consistent long-term growth, driving continued (albeit small) dividend increases over time.
Dividend profile
On that note, Enbridge’s 6.3% yield is clearly attractive in its own right. For Canadian investors looking to earn in excess of the Canadian 10-year bond yield (currently around 3.2%), a yield that’s almost double this rate should get some investors out of bed on its own.
However, Enbridge has also positioned itself as a key dividend-growth stock, delivering small incremental increases over time. The company most recently announced a 3% dividend hike, and I’d expect some similar hikes to come in the future.
These should be driven by increased investments in the company’s infrastructure portfolio. Enbridge has announced plans to upgrade its mainline network with a $2 billion investment, and there will likely be additional upgrades in the future. With Enbridge able to fund these projects via its cash flow (while maintaining its dividend yield), I think there’s upside ahead. That said, there is some level of risk tied to the company’s debt load, which does remain high at the moment.
The verdict
In my view, Enbridge is among the most attractive high-yield dividend stocks in the market right now. The company’s 6.3% dividend yield is really where investors should start. From there, assessing the company’s strong fundamentals and future dividend growth potential makes this name one I think could be a no-brainer for most investors.
