The stock market looks like a rollercoaster these days. Between global economic uncertainty and ongoing trade tensions, volatility remains high. However, investors can still generate worry-free income from high-quality Canadian dividend stocks.
Some TSX stocks have been consistently paying dividends for decades. This shows the resiliency of their business model, strong business fundamentals, sustainable payouts, and focus on enhancing shareholder value. These companies are considered top picks for investors looking to build a stable, long-term stream of passive income.
So, if you are looking to generate reliable income, here’s an attractive dividend stock offering a 6% yield. Moreover, this Canadian dividend stock hasn’t missed a payment in three decades.
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The 6% dividend stock
Investors seeking regular dividend income for decades could consider adding Enbridge (TSX:ENB) stock to their portfolios. This energy infrastructure giant currently pays a quarterly dividend of $0.943 per share, offering investors an impressive 6% annual yield.
Enbridge has an exceptional track record of dividend distribution. It has paid dividends for over 70 years and has increased its payout for 30 consecutive years. Even during challenging periods like the COVID-19 pandemic, Enbridge continued to raise its dividend while many energy peers cut or suspended theirs. Enbridge’s dividend-growth history shows it hasn’t missed a payout in at least the last three decades.
A key reason behind this reliability is Enbridge’s sustainable payout ratio of 60-70% of its distributable cash flow (DCF). This disciplined approach ensures dividends are well-covered while the company invests in growth opportunities.
Enbridge’s business model is built for stability. Its extensive pipeline network transports oil and gas across North America under long-term contracts, insulating it from commodity price swings. Additionally, its regulated utility assets and growing investments in renewable energy diversify earnings and support predictable cash flows.
With secured, low-risk revenue streams and a focus on expanding its DCF, Enbridge remains committed to rewarding shareholders.
Enbridge to reward investors with higher payouts
Enbridge looks well-positioned to reward its shareholders with higher dividend payments in the coming years. Its core liquid pipelines business will likely benefit from long-term contracts and take-or-pay agreements that provide revenue stability and consistently generate solid cash flows, supporting its payouts.
Enbridge’s gas transmission and midstream business has minimal commodity risk and is poised to generate predictable cash flows. Moreover, its regulated assets generate low-risk utility-like cash flows. It is also well-positioned to benefit from the global shift towards renewable energy. With long-term power-purchase agreements and the ongoing push for electrification, Enbridge has tailwinds to support future growth in this space.
Moreover, its strategic acquisitions and secured backlog of $28 billion focused on accretive, low-risk projects augur well for growth.
Enbridge’s management projects adjusted earnings per share (EPS) and DCF per share to grow by 4-6% and 3% annually through 2026, respectively. Beyond that, the company anticipates an average annual growth rate of approximately 5% for DCF per share and EPS in the long run. Enbridge’s annual dividend is expected to grow in line with its DCF per share, implying a mid-single-digit increase over the long term.
Overall, Enbridge’s diversified portfolio, contracted cash flows, low-risk commercial arrangements, and sustainable payout ratio will enable it to continue delivering solid DCF per share, supporting its future payouts.
