Canada Revenue Agency: The BPA Could Reduce Your Tax Bill by $2,160 in 2022!

You can invest the savings derived from tax credits in dividend stocks such as Enbridge.

| More on:

While the taxes in Canada are some of the highest in the world, the federal government and the Canada Revenue Agency provide residents with tax credits that can help reduce their financial burden. One such non-refundable tax credit is the basic personal amount (BPA) that can be claimed by all residents.

The BPA credit aims to provide a reduction from federal income tax to individuals with taxable income below the BPA. It also provides a partial reduction to those with a taxable income above the BPA.

For 2022, the Canada Revenue Agency has increased the BPA to $14,398. So, you will be able to save $2,160 (15% of $14,398) in your annual taxes if your taxable income is less than $155,625.

Invest these tax savings in dividend stocks such as Enbridge

It’s always good to save on taxes. But you need to invest these savings to create long-term wealth. Equities remain the best bet for long-term investors, and investing in dividend stocks such as Enbridge (TSX:ENB)(NYSE:ENB) can help you reach your financial goals at an accelerated pace.

Interest rates are near record lows, making it difficult for investors to beat inflation rates over time. Enbridge offers investors a forward yield of 6.92% as well as the opportunity to benefit from long-term capital gains.

One of the largest companies in Canada, Enbridge is valued at a market cap of $99 billion and an enterprise value of $175 billion. It generates the majority of its EBITDA from its expansive network of oil and natural gas pipelines followed by natural gas utility operations and renewable power assets.

Enbridge transports around 25% of the total crude oil produced in North America, allowing it to benefit from a wide economic moat. The barriers to entry in the oil and gas industry are extremely high, and it’s getting increasingly difficult to get approvals to expand pipeline networks right now.

Enbridge’s cash flows are backed by long-term contracts, making the company immune to fluctuations in commodity prices. Its robust business model has enabled Enbridge to generate cash flows across business cycles, which, in turn, supported dividend increases in each of the last 26 years.

ENB stock is a top dividend bet

Enbridge has historically grown its base of cash-generating assets by expanding its capital program over time. The company’s management team aims to increase its cash balance by $2 billion in 2022. This is in addition to its capital requirements for the next year.

Enbridge is also focused on maintaining a payout ratio of less than 70% going forward. It basically means around 70% of its distributable cash flows will be used to pay dividends to investors, and the rest will be used for capital expenditures or lowering of overall debt.

Further, Enbridge aims to increase its cash flows between 5% and 7% through 2023, which should allow the company to keep increasing dividend payouts higher.

Right now, an investment of $2,000 in ENB stock will allow you to generate close to $140 in annual dividend payments. After adjusting for dividend payouts, ENB stock is up over 21% in the last year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath owns shares of ENBRIDGE INC. The Motley Fool recommends Enbridge.

More on Dividend Stocks

Canadian dollars are printed
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Toronto-Dominion Bank (TSX:TD) stock could do well in the year ahead.

Read more »

monthly desk calendar
Dividend Stocks

Monthly Income: Top Dividend Stocks to Buy in November

Here are two of the best monthly dividend stocks in Canada you can buy in November 2024 and hold for…

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

Hourglass and stock price chart
Dividend Stocks

Goeasy Stock: Is It Heading for a 52-Week High?

Goeasy stock has been edging higher, especially after another record-setting earnings report. So are 52-week highs in sight?

Read more »