Dividend stocks are among the best investments to buy for a number of reasons. First, while stock prices can fluctuate wildly in the short term, dividends provide a more stable source of return that investors can rely on across market cycles.
Therefore, not only do they generate consistent income and returns on your investment regardless of whether the market is trending up, down or sideways, but they also tend to be less volatile than their non-dividend paying peers.
That’s why dividend stocks continue to play such an important role in many investors’ portfolios. High-quality dividend stocks, like Enbridge, are companies that have a good reputation, which allows them to generate consistent cash flow, which helps fund their continually growing dividends.
In fact, consistent cash flow generation and therefore constant dividend increases are a big part of what makes Enbridge one of the best dividend stocks in Canada. Enridge has increased its dividend annually for more than three decades in a row now.
So while uncertainty in this environment continues and Enbridge stock is trading near its 52-week high, it remains one of the best dividend stocks to buy for passive income seekers.
Why is Enbridge one of the best dividend stocks for passive income investors to buy and hold for years?
One of the biggest reasons why Enbridge continues to stand out as a top dividend stock is the nature of its businesses and how vital they are to the North American economy.
Furthermore, even though Enbridge is an energy company, the vast majority of its revenue comes from long-term, contracted energy infrastructure assets, meaning Enbridge does not have to rely on volatile commodity prices to generate cash flow.
For example, Enbridge owns and operates one of the largest pipeline networks in North America. In fact, Enbridge transports about 30% of the crude oil produced in North America and about 20% of the natural gas consumed in the United States.
These assets operate under regulated contracts, generating predictable revenues for Enbridge. And that stability ensures that the company can confidently pay and increase its dividend year after year.
Another reason Enbridge remains attractive to income investors is its focus on balance sheet strength and cash flow coverage. Although the company has significant debt, management has worked for years to improve leverage metrics and extend debt maturities.
That’s why Enbridge not only offers an attractive yield of 6% and consistent dividend growth per year, but it also ensures that the dividend is sustainable.
For example, right now Enbridge’s annual dividend is $3.88 per share. Meanwhile, under Enbridge guidance, the company expects to generate distributable cash flow per share of $5.70 to $6.10.
So even if Enbridge only reached the bottom of that range, the dividend would still only have a 68% payout ratio.
It is also worth noting that Enbridge continues to invest in expansion projects for its liquids, gas transmission and gas distribution businesses. Additionally, Enbridge has steadily expanded its portfolio of renewable energy assets as it continues to position itself for the future.
So if you’re looking for quality dividend growth stocks that can generate significant passive income for years to come, there’s no doubt that Enbridge is one of the best to buy.
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