Dividend investing is one of the best ways to get reliable returns on your investment in the stock market. Identifying and investing in a portfolio of high-quality dividend stocks can set you up for financial freedom in the long run.
Stock market investing is inherently risky due to the cyclical nature of the market. There will be times when you will see remarkable returns through capital gains, increasing the value of your holdings over time. However, downturns in share prices can decrease the value. With dividend stocks, you can keep receiving returns through quarterly or monthly distributions from the underlying business as a reward for being an investor.
Today, I will discuss a TSX dividend rockstar that might be worth adding to your self-directed investment portfolio, especially if you have a focus on creating a passive income stream.
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Enbridge
Enbridge Inc. (TSX:ENB) is a staple in many self-directed and institutional investment portfolios. The $146.5 billion market-cap company owns and operates an extensive portfolio of energy infrastructure assets that transport hydrocarbons, like natural gas and crude oil. The company transports around a fifth of the hydrocarbons produced and consumed in Canada and the US, making it a business that’s vital to the North American economy.
The energy company does not limit itself to energy transportation. Enbridge also owns and operates one of the largest natural gas distribution companies in Canada and a regulated natural gas utility business. These businesses add a defensive value to Enbridge stock due to the essential nature of the services.
Enbridge also has a small but growing portfolio of renewable energy assets, future-proofing the company’s cash flows and revenues for a greener energy industry that we might see a few years down the line.
As of this writing, Enbridge stock trades for $67.16 per share, down by around 4% from its 52-week high. At these levels, it has a price-to-earnings ratio of 25.9, suggesting that it is relatively undervalued. Enbridge stock also boasts a juicy 5.6% dividend yield to go along with it.
Enbridge is beginning to see the effects of its natural gas transmission come into effect. It has also added $3 billion to its development pipeline in its most recent quarter, boosting the value of its secured capital programs to $35 billion. The company expects the revenue and cash flow from its new assets to increase its distributable cash flow annually by around 5% between 2026 and 2030.
Foolish takeaway
Enbridge stock is a reliable dividend stock that has increased its payouts for the last 30 years. The company’s acquisition of natural gas utilities south of the border and its ongoing capital programs will position the stock to deliver further dividend hikes for years to come. However, it is important to remember that Enbridge stock is not immune to the impact of a market crash.
A significant downturn can lead to share prices declining to lower levels. However, the stock is well-capitalized enough to continue distributing quarterly dividends to its shareholders for years to come. It might be the best time to start investing in its shares.
