A proven way to build a passive income portfolio is by investing in high-quality dividend stocks. Notably, several TSX stocks have paid and increased their dividends, making them reliable investments to generate regular income in all market conditions.
Utilities, for example, love it Fortis And Canadian utilitiessuch as financial service providers Bank of Montreal And Royal Bank of Canadaand energy companies such as Canadian natural resources have long been an investor favorite and have consistently rewarded them with growing dividend payments over the years. Their stable earnings and ability to maintain and grow distributions across economic cycles highlight the strength of their operations and cash flows.
While these fundamentally strong companies remain solid investment options for income-oriented investors, here I will focus on a TSX stock that offers a high and sustainable yield of 5.8%. Plus, the company has been paying and increasing its dividend for decades, making it a reliable income stock to buy and hold.
A top dividend share with a yield of 5.8%
Among the top dividend stocks on the TSX, investors should consider Enbridge (TSX:ENB). This energy transport company has been paying dividends for over seventy years, regardless of commodity and economic cycles. In addition, it has increased its annual dividend since 1995, reflecting the company’s ability to generate strong, predictable cash flows, supported by its 200 diversified income streams.
Enbridge’s solid payout history also reflects the resilience of its business model and ability to generate stable earnings and distributable cash flow (DCF) despite commodity price volatility.
Notably, 98% of earnings before interest, depreciation and amortization (EBITDA) comes from regulated or long-term take-or-pay contracts. Additionally, approximately 80% of Enbridge’s EBITDA is protected against inflation, keeping payouts steady over time. Additionally, the expanded asset footprint connects key supply and demand zones across North America, driving high asset utilization and positioning the company to capitalize on growing energy demand.
Enbridge offers a quarterly dividend of $0.97 per share, which yields a yield of more than 5.8% at the current market price.
Enbridge will reward shareholders with a higher dividend
Looking ahead, Enbridge’s diversified revenue base and continued momentum in its core liquid pipeline and utilities businesses provide a solid foundation for continued dividend growth. The company’s resilient business model, supported by an extensive infrastructure network and disciplined capital allocation, will strengthen its DCF.
Enbridge targets a dividend payout ratio of 60-70% of DCF. The payout ratio is sustainable in the long term and also allows the company to maintain sufficient capital to finance new growth projects.
In addition to the strength of its core businesses, Enbridge’s investments in renewable energy also position the company well to benefit from growing energy demand, led by artificial intelligence (AI)-driven data center projects. Enbridge also benefits from the global energy transition, including opportunities such as the conversion of coal to gas.
Management expects the company’s earnings and DCF per share to grow at a mid-single-digit rate over the medium term. This indicates that Enbridge’s dividend is likely to increase at a similar pace in the coming years.
Overall, Enbridge’s history of solid dividend growth, resilient earnings, and visibility into future payouts make it a top dividend stock that investors can hold for decades.
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