Written by Sneha Nahata at The Motley Fool Canada
Investors in pursuit of passive income might consider allocating funds to shares of companies sporting a robust history of consistent dividend distribution and growth. It is advisable to invest in corporations with a resilient business model. Moreover, investors should look for companies with well-established businesses, diversified revenue streams, and the ability to generate profitable growth. Further, these enterprises must have a sustainable payout ratio.
This emphasis is crucial since companies with solid fundamentals and a commendable track record of dividend payouts tend to sustain and increase their payouts, regardless of economic fluctuations and stock market volatility. Consequently, such companies can be relied upon to generate passive income without much concern.
Fortunately, the TSX has numerous high-quality dividend-paying stocks that have sustained and increased their dividends for years, regardless of market conditions. Enbridge (TSX:ENB) is a noteworthy example of such a company.
With this background, let’s examine the factors that make Enbridge a top passive-income stock. Moreover, I’ll discuss how many shares you need to buy to make $1,000/year from Enbridge stock.
Enbridge: A solid passive-income stock
Enbridge provides the transportation and export of oil and gas. Additionally, it manages a large natural gas utility business and sports a growing portfolio of renewable energy assets. Given its pivotal role in the energy value chain, Enbridge enjoys consistent demand, and its assets constantly experience high utilization. This operational strength enables the company to generate robust distributable cash flows (DCF), providing a solid foundation for its dividend payments.
Notably, Enbridge has a commendable track record of dividend payments and growth. As a Dividend Aristocrat, the company has been distributing and increasing its dividend for several years. To be precise, it has paid a regular dividend for an impressive 69 years. What sets it apart is the fact that Enbridge has consistently increased its dividend for 29 consecutive years. Furthermore, its dividend has demonstrated an impressive compound annualized growth rate (CAGR) of 10% during the same period, surpassing that of its peers.
Another distinguishing factor is Enbridge’s unwavering commitment to maintaining and increasing its annual dividend even during the challenges posed by the pandemic. While many energy companies suspended or reduced their payouts, Enbridge demonstrated resilience by enhancing shareholders’ value.
Enbridge’s revenue streams are highly diversified, supported by solid demand for its services. Further, long-term customer contracts, regulated cost-of-service tolling arrangements, and power-purchase agreements augur well for growth. Additionally, Enbridge is poised to benefit from its multi-billion-dollar secured projects and investments in both conventional and renewable energy assets. In addition to organic growth, Enbridge’s accretive acquisitions will likely accelerate its growth, further boosting its DCF per share.
The company pays a quarterly dividend of $0.915 per share, reflecting a yield of over 7.7%. Moreover, its payout ratio of 60-70% of DCF is easily sustainable in the long term.
Make $1,000/year with Enbridge stock
With its reliable dividend payments and resilient business model, Enbridge stands out as a top stock for making steady passive income. The table below shows that by buying 274 shares of Enbridge, one can earn a passive income of over $250.7 per quarter or over $1,000/Year.
Number of Shares
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