Buy 928 shares of this stock for $300 in monthly dividend income

I recently wrote an article detailing how I earned (on average) $371 per month in dividend income in my RRSP and TFSA. The article detailed the types of assets I derived income from and pulled 12-month estimates from my investment accounts to arrive at a monthly average. The article also showed how much I would get if I invested all my money in my top dividend stocks (TD bank). That amount ultimately came to $544 per month.

It’s true that stocks like TD Bank can produce significant dividend income. TD Bank was a real high yielder early this year, when it cost just $80 and yielded about 6%. Now, however, TD shares are much more expensive, yielding just 3.9%. If you have a smaller amount to invest than I do and you want relatively high dividend income, you need something with a higher yield than that. In this article, I explore a stock that can earn you $300 per month in dividends with just $61,971 invested. While this stock is – in my opinion – riskier than TD, it can give you a substantial monthly income supplement with much less than $100,000 invested.

So let’s jump right in.

Enbridge

Enbridge Inc (TSX:ENB) is a TSX pipeline and natural gas company whose stock pays $0.97 in dividends per quarter, or $3.88 per year. At the current share 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 a dividend of $3,600 per year – an average of $300 per month. 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, investing just $61,971 in Enbridge stock can earn you $900 in dividends per quarter, which equates to $300 per month. While Enbridge doesn’t have a literal monthly payout schedule, the year-end effect is the same as if you were receiving $300 each month (provided you don’t use dividends to spend 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 things don’t stop there. Enbridge not only currently has a high dividend yield, but also has a very good dividend track record. The company has increased its dividend every year for eleven years in a row and has delivered an average CAGR dividend growth of 3% over the past five years. The growth rate wasn’t that high, but on the other hand, the stock already has a pretty high return. If Enbridge can continue to increase its payout by 3% per year over the next five years, those who buy today will be able to enjoy huge returns by the end of the period.

Is Enbridge a good investment?

Now that we’ve examined Enbridge’s dividend, it’s time to examine the overall quality of the company.

One thing that’s great about Enbridge is its competitiveness. It is the largest North American pipeline; it ships the vast majority of Canadian oil to the US; it supplies 75% of Ontario’s natural gas. Simply put, it is an economically indispensable company – which bodes well for its future.

Some financial details for Enbridge are less positive. The company often has years where free cash flow is negative, it has almost twice as much debt as equity, and its payout ratio is 100%. These factors are not positive. Furthermore, the shares trade at 23 times earnings, which is high for the energy sector. In my opinion, Enbridge isn’t the best bet on the TSX today, but the dividend itself is quite safe. An income-oriented investor could do much worse.