Recently I wrote an article detailing how I’d been earning $371 per month (on average) in dividend income in my RRSP and TFSA. The article detailed the types of assets I was getting income from, and pulled 12-month estimates from my brokerage accounts to arrive at a monthly average. The article also showed how much I’d be getting if I’d invested all my money in my top dividend stock (TD Bank). That amount ended up averaging out to $544 per month.
It’s true, stocks like TD Bank can provide considerable dividend income. TD Bank was a true high yielder at the start of this year, when it cost just $80 and yielded about 6%. Now, however, TD stock is much pricier, and only yields 3.9%. If you have a smaller amount to invest than I have and you want a relatively large amount of dividend income, you’ll need something with a higher yield than that. In this article, I’ll explore a stock that could get you to $300 per month in dividends with just $61,971 invested. While this stock is – in my opinion – riskier than TD is, it can provide you a substantial monthly income supplement with far less than $100,000 invested.
So, let’s jump right into it.
Enbridge
Enbridge Inc (TSX:ENB) is a TSX pipeline and natural gas utility company whose shares pay $0.97 in dividends per quarter, or $3.88 per year. At today’s stock price of $66.78, that gives us a respectable dividend yield of 5.8%. If you invest $61,971 in this stock you can expect to get $3,600 in dividends per per year – $300 per month on average. See math below.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Enbridge | $66.78 | 928 | $0.97 per quarter ($3.88 per year) | $900 per quarter ($3,600 per year) | Quarterly |
As you can see, a mere $61,971 invested in Enbridge stock can provide you with $900 worth of dividends per quarter, which averages out to $300 per month. Although Enbridge does not have a literal monthly payout schedule, the end-of-year effect is the same as if you’d been getting $300 each and every month (provided that you are not using dividends for spending money, in which case the payout schedule does make somewhat of a difference).
So, Enbridge has quite a bit of dividend potential. But the good stuff doesn’t stop there. Not only does Enbridge have a high dividend yield today, it also has a very good dividend track record. The company has raised its dividend each year for 11 consecutive years, and has averaged 3% CAGR dividend growth over the last five years. The pace of growth has not been that high, but then again, the stock has a pretty high yield already. If Enbridge can keep raising its payout 3% per year over the next five years, those buying today will enjoy a mighty high yield by the end of the period.
Is Enbridge a good investment?
Having explored Enbridge’s dividend, it’s time to explore the company’s overall quality.
One thing that’s great about Enbridge is its competitive position. It’s the biggest North American pipeline; it ships the overwhelming majority of Canadian oil going to the U.S.; it supplies 75% of Ontario’s natural gas. Put simply, it is an economically indispensable company — that bodes well for its future.
Some of the financial details for Enbridge are less positive. The company often has years when its free cash flow is negative, it has nearly twice as much debt as equity, and its payout ratio is pushing 100%. These factors aren’t positives. Also, the stock trades at 23 times earnings, which is high for the energy sector. In my opinion, Enbridge isn’t the best overall opportunity on the TSX today, but the dividend itself is fairly safe. An income-focused investor could do much worse.
