For those looking to generate meaningful passive income today, and for tomorrow (and presumably the long term), finding companies with not only the rock-solid balance sheets that can support an above-market yield today, but also the ability to do so for many years to come is very important.
I think there are actually quite a few top Canadian stocks I’d put in this category. That said, there is one that stands out as providing excellent up-front yield right now, with the ability to grow its distribution over time. Let’s dive in!
Source: Getty Images
Enbridge
As most investors are aware, I’m still very bullish on Canadian pipeline giant Enbridge (TSX: ENB).
Shares of the Canadian pipeline giant have more than doubled over the past five years, and done so in a rather consistent way. Now, much of this recent growth has taken place over the course of the past two years, as energy prices have remained robust and administration changes in both Canada and the U.S. have changed the geopolitical landscape more broadly for the energy sector.
Energy infrastructure, such as the vast network of pipelines Enbridge owns and operates across a large swath of North America remain integral to the energy independence narrative we’re seeing play out. And with recent newfound optimism in this sector, thanks to commentary from Prime Minister Mark Carney about the potential for new pipelines and expansion projects to be approved for the first time in more than a decade, there’s a lot to like for investors considering companies like Enbridge in this sector right now.
It’s more than macro narrative
Aside from the stark shift in political rhetoric around pipelines, Enbridge has a solid fundamental story as well that’s clearly driving this stock higher.
After multiple quarters of earnings beats, Enbridge’s 5.5% dividend yield also comes with a forward price-earnings ratio of 21 times. And while debt-related concerns have hit this stock in the past, the company’s ability to pay down debt and continue to raise its dividend has turned Enbridge into a cornerstone holding for many top institutional investors.
That’s a dynamic I don’t see changing anytime soon, considering the shift we’re seeing in the market from investors looking to hold more exposure to this sector. Enbridge remains a long-term buy in my books.
