High-yield dividend stocks are the best investments for generating passive income. Additionally, by focusing on companies with strong fundamentals and a solid history of paying dividends, investors can ensure a relatively safe income stream, even amid market volatility.
It is worth noting that several Canadian stocks are known for paying and increasing their dividends in all market conditions. In addition, they have a growing earnings base and a sustainable payout ratio, making them a reliable source of income.
But before we continue, it is essential to recognize that all investments involve some level of risk and that there is no such thing as a completely safe income-generating investment.
In this context, let's look at a TSX stock that offers a high and well-protected yield of 6.9%. Investors can rely on this Canadian company for secure returns.
The best option for secure income
While the TSX has several stocks that have been paying and increasing dividends for decades, Enbridge (TSX:ENB) stands out for its excellent dividend payments and its track record of growth, high yield and sustainable payouts.
The energy company, which transports and distributes oil and natural gas, has paid dividends for about seven decades and has consistently increased its dividends for nearly three decades (29 years, to be exact).
It is worth noting that Enbridge maintained and even increased its dividend during the COVID-19 pandemic, a period when many energy companies suspended or reduced their payouts. This highlights the resilience of Enbridge’s dividend and its ability to weather difficult economic conditions.
Enbridge currently pays a quarterly dividend of $0.915 per share, offering a solid yield of 6.7% based on its closing price of $54.60 as of September 4.
Why is Enbridge a safe dividend income stock?
Enbridge has an impressive track record of dividend payments and growth. In addition, the company is well positioned to reward its shareholders with higher payouts in the years ahead. Enbridge’s extensive liquids pipeline network connects key supply basins and major demand centers. Its assets therefore see high utilization, driving its consistent earnings and distributable cash flow (DCF) growth.
In addition, Enbridge’s assets are backed by power purchase agreements (PPAs), long-term contracts, and cost-of-service regulated tolling frameworks. These agreements add stability and ensure consistent earnings growth even amid macroeconomic uncertainty.
The company is steadily expanding its conventional and renewable energy assets. This strategy positions it well to capitalize on future energy demand and diversify its revenue streams. In addition, Enbridge is also focused on strategic acquisitions, which will likely accelerate its growth rate.
Enbridge is poised to benefit from its robust secured capital projects, valued at approximately $24 billion. In addition, the company is generating low-risk earnings by focusing on low-capital-intensity projects and regulated utility investments.
Enbridge is expected to achieve mid-single-digit growth in earnings per share and discounted cash flow over the long term. This growth should support similar increases in its dividend over the same period. Moreover, with a payout ratio of 60-70% of discounted cash flow, the dividend is in a strong position.
In summary
For investors looking for secure dividend income, Enbridge is an attractive option. Its strong track record of paying dividends, resilient business model, and expanding earnings base position it well to deliver consistent returns to shareholders over time.