The key to success with such a strategy is to have a well-diversified portfolio of high-quality dividend stocks. Investing in just a few dividend stocks carries the risk of losses if the underlying companies face challenges that force them to pause, cut, or stop dividends altogether.
The stock of fundamentally strong Companies that have the financial and future growth potential to continue financing and grow dividends can minimize risk and maximize returns.
The TSX has no shortage of high-quality dividend stocks. Today we’ll look at one of the biggest TSX energy stocks to consider for your portfolio.
Enbridge
Enbridge (TSX:ENB) is a Calgary-based energy company with a market capitalization of $147.45 billion in Canada. It owns and operates an extensive network of midstream assets, transporting approximately one-fifth of the hydrocarbons produced and consumed in North America. The company also operates a regulated natural gas company and Canada’s largest natural gas distribution company. Enbridge is also a player in the fast-growing renewable energy sector, with a growing portfolio of clean energy assets.
Enbridge stock is a great example of a Canadian dividend stock that investors can rely on for decades. The stock has been increasing its dividends over the past thirty years and it doesn’t look like this trend will be broken anytime soon. The company’s revenue growth and cash flow over the years have allowed it to increase its dividend for decades.
Last year, Enbridge acquired three U.S. natural gas companies, spending about $14 billion. This deal is likely to provide the company with significant long-term success. Utilities are inherently defensive due to the essential nature of the services they provide. If Enbridge becomes one of them, the company will have predictable cash flows that could be critical to long-term success.
Canada has recently refocused its interest in building new major energy infrastructure to meet rising demand for North American energy. The company is currently working on a massive $32 billion capital program that should further increase distributable cash flow in the coming years. It means we can expect Enbridge to continue its dividend growth for the foreseeable future.
Silly takeaway
The stock market is still going through an uncertain period at the moment. It will come as no surprise that stock prices will rise and fall significantly in the coming weeks. However, investing in Enbridge should be more focused on capitalizing on reliable dividends rather than potential capital gains.
If you have some money to put to work in the market and plenty of room in a tax-free savings account (TFSA), I would recommend allocating some space to Enbridge stock. At the time of writing, it is trading for $67.60 per share. You can lock in the 5.58% dividend yield in your self-managing portfolio.
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