When I think about true âbuy and hold foreverâ stocks, a few traits come to mind. They operate in industries with durable demand, have a wide moat that keeps competitors at bay, generate predictable cash flow, and most importantly, consistently increase their dividends at a rate above inflation.
That last point is critical â without dividend growth, your income slowly erodes in real terms. In Canada, a handful of blue chip names fit this description, but one I have a particular soft spot for is pipeline giant Enbridge (TSX: ENB).
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What is Enbridge?
Youâve probably seen Enbridgeâs logo on your gas bill and wondered why you pay so much. Thatâs because Enbridge is one of North Americaâs largest energy infrastructure companies. It transports about 30% of all crude oil produced on the continent and 20% of the natural gas consumed in the U.S. Its operations include oil and gas pipelines, natural gas utilities, and renewable energy projects.
The business model is built on long-term contracts, which means revenue doesnât fluctuate wildly with commodity prices. Instead, Enbridge earns steady toll-like cash flow from the energy people use every day, making it behave more like a utility than a traditional energy producer. As a result, it is less volatile than the average oil and gas explorer and producer.
Enbridge dividend
Enbridge is a dividend powerhouse. The company has increased its dividend for 29 consecutive years, with a compound annual growth rate of roughly 9% over the past three decades. Today, the quarterly payout is $0.9425 per share, which works out to $3.77 annually. At a recent share price of about $69.30, thatâs a forward yield of around 5.4%.
The payout ratio sits comfortably within managementâs 60%â70% target range of distributable cash flow, suggesting that the dividend is well-supported and not at risk of being cut. The next dividend will be paid on December 1 to shareholders of record on November 15, a quarterly routine that income investors can count on.
The foolish takeaway
Enbridge isnât the only Canadian dividend stock worth owning for life, but itâs one of the best candidates to form the foundation of a portfolio. Its wide moat infrastructure assets, predictable cash flow, and reliable dividend growth track record make it a stock you can buy and hold for decades. Held in a TFSA, those dividends compound tax-free, but even in a non-registered account, Enbridgeâs eligible dividends offer favourable tax treatment.
