Finding yields that can beat fixed income securities such as bonds is an adventure many take on. Unfortunately, this can be a very disappointing and unfruitful exercise when investors start looking at the underlying health and fundamentals of the dividend stocks providing bond-crushing returns.
That said, Enbridge (TSX: ENB) has been one of the top dividend stocks I continue to come back to for investors seeking not only a meaningful up-front yield, but also a sustainable dividend outlook and a company that can continue to raise its distribution over time.
Let’s dive into why this is a top TSX dividend stock investors won’t want to miss out on over the long term.
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Dividend Reliability
As far as companies that have raised their dividends for decades are concerned, Enbridge and its existing 6% dividend yield are certainly attractive. The energy infrastructure company owns and operates one of the largest and most interconnected pipeline networks in North America, bringing primarily Western Canadian crude produced out of Alberta’s oil sands to refiners in the U.S.
This model has produced some of the most stable and consistent cash flows of any major energy-related stock. Much of that has to do with the nature of the company’s contracts, which allow for less commodity price volatility that can bleed into its stock price.
Over the long term, I think this is the kind of dividend stock most investors can get behind.
Strong financials
The final piece of the puzzle I think investors need to consider is whether or not Enbridge’s underlying fundamentals suggest that its dividend can not only increase over time (at least the rate of inflation), but also be sustained. That’s all to do with the company’s financial picture.
On that front, Enbridge looks to be on solid footing, with the company reporting EBITDA growth of 18% over the past year and an increase of 6% in distributable cash flow per share over the same timeframe.
Those kinds of numbers not only cover Enbridge’s 3% annual dividend increase (expected for the foreseeable future), but ensure that this will be an ongoing concern for decades to come.
