Retirees and other dividend investors are searching for reliable high-yield stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios.
In the current market conditions, where many stocks are near record highs and economic headwinds could be on the horizon, it makes sense to consider stocks that have the ability to deliver ongoing dividend growth through a challenging economic environment.
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Enbridge
Enbridge (TSX: ENB) just hit a new all-time high of $80 per share. The stock is up 26% in the past 12 months and has been on an upward trend for move than two years.
Despite the big rally in the share price, investors can still pick up a 4.8% dividend yield on the stock.
Enbridge diversified its asset portfolio in recent years. The company expanded into exports by buying an oil export facility in Texas and took a stake in the Woodfibre liquified natural gas (LNG) export facility being built on the coast of British Columbia. Enbridge also bulked up its wind and solar division by acquiring the third-largest renewable energy business in the United States. Finally, Enbridge spent US$14 billion in 2024 to buy three natural gas utilities in a deal that turned it into the largest natural gas utility operator in North America.
The moves have proven to be timely. Demand for Canadian and American oil and natural gas is rising as global buyers seek out reliable supplies from stable countries. In the domestic markets, the construction of hundreds of AI data centres is driving demand for more electricity. Tech companies are getting Enbridge’s renewables group to build solar and wind facilities to supply renewable power. This is not enough, however, in most cases, and gas-fired power generation facilities are being constructed to provide scalable flows of electricity. That is going to drive a surge in demand for natural gas. Enbridge’s extensive natural gas transmission infrastructure and its portfolio of natural gas utilities position the firm to benefit from the trend.
Enbridge is currently working on a $40 billion capital program that will boost adjusted earnings and distributable cash flow by about 5% per year over the medium term. This should support ongoing dividend increases.
Enbridge’s pivot to investments in other segments was driven by years of government opposition to new large energy pipelines. The current Canadian and U.S. governments are more open to getting new oil and natural pipelines built. Enbridge’s expertise in this segment in both countries could lead to new large projects being approved and added to the development plan.
Risks
High oil prices risk driving up inflation to the point where the Bank of Canada and the U.S. Federal Reserve are forced to start raising interest rates again to keep inflation under control. The last time this happened, in 2022 and 2023, Enbridge’s share price fell from $59 to below $45. The company uses debt to fund part of its development plan, so higher borrowing costs can put a pinch on profits and cash that is available for dividends.
The bottom line
Enbridge pays a good dividend that should continue to grow. Volatility is expected, but if you have cash to put to work in a buy-and-hold income portfolio this stock deserves to be on your radar.
