Want Passive Income for Life? It Only Requires 1 Move

Earning passive income for life begins with the purchase of established dividend stocks with dividend-growth potential.

| More on:

Passive income refers to money earned with little or minimal effort. Canadians are fortunate, because it only requires one move to create earn passive income for life: purchase established dividend stocks with dividend-growth potential to boost your retirement income significantly.

Enbridge (TSX:ENB)(NYSE:ENB) and BCE (TSX:BCE)(NYSE:BCE) are TSX’s top buy-and-hold stocks. Besides the enduring businesses, their dividends tend to grow over time. Likewise, dividend growth should enable investors to outpace inflation. For younger investors with long timelines, the energy king and telco giant can set them up for dividend-income living in the future.

Utility-like business model

Enbridge currently pays an ultra-high 6.50% dividend yield. At $42.27 per share, investors enjoy an 8.2% year-to-date gain. Assuming you invest $75,000 today, your money would compound to $192,888 in 15 years. If the yield remains constant, the quarterly dividends in 2037 would be $3,134, or $1,044 per month.

The $83.98 billion energy infrastructure company has the financial capacity to grow and sustain its dividend growth. Enbridge’s low-risk, utility-like business model and four best-in-class franchises are the reasons for the leading shareholder returns. The total return in the last 46.11 years is a commanding 52,002.67% (14.53% CAGR).

Management’s ongoing concern is to develop its existing assets (gas distribution, gas transmission, and liquids pipeline) and building a new renewable power portfolio. The competitive advantages are the diversified sources of cash flows and predictable cash flows.

About 98% of Enbridge’s cost of service are highly contracted, and 95% of clients are investment grade. Another unique advantage is that 80% of EBITDA has built-in inflation protection. Moreover, the company is confident its businesses have high visibility to attract organic growth opportunities. It should drive future cash flow growth.

Enbridge expects distributable cash flow (DCF) per share to grow by 5-7% (CAGR) through 2024. From 2022 to 2024, the company has a secured capital program of $9 billion and an annual investment capacity of $5 billion to $6 billion. Given the low-risk commercial and financial profile, this energy stock’s dividend-growth streak should extend to 28 consecutive years in 2022.

Top 5G stock

Canada’s most dominant telecommunications company pays an above-average 5.27% dividend. At $66.40 per share, the trailing one-year price return is 29.5%. BCE’s total return in 46.11 years is 76,720.97% (15.5% CAGR). The $59.29 billion company’s first dividend payment was in 1881, and it hasn’t a missed a payout since.

On February 1, 2022, Bell won top honours from Global Wireless Solutions (best 5G network) and PCMag (fastest 4G and 5G mobile network). Ookla also named Bell as Canada’s fastest 5G network. BCE will release its Q4 and full-year 2021 results today. Industry analysts expect a 5.3% revenue increase from Q4 2020.

BCE didn’t disappoint investors in Q3 2021, as evidenced by the 0.8% and 9.9% growth in operating revenues and net earnings versus Q3 2020. Management cited the strong marketplace performance, exceptional liquidity, and well-structured balance sheet for the impressive results. It also said BCE’s net debt leverage ratio is the lowest in the sector.

Increase financial security

Apart from being wealth builders, Enbridge and BCE increases the financial security levels of investors. Canadians can expect a very comfortable retirement with substantial passive income on top of their Canada Pension Plan and Old Age Security pensions.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge.

More on Dividend Stocks

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Utility Stocks That Are Smart Buys for Canadians in November

These utility stocks benefit from regulated businesses and generate predictable cash flows that support higher dividend payouts.

Read more »

Start line on the highway
Dividend Stocks

Invest $10,000 in This Dividend Stock for $600 in Passive Income

Do you want to generate passive income? Forget the rental unit! This option will save you the mortgage yet still…

Read more »

Senior uses a laptop computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

TD Bank (TSX:TD) shares are way too cheap with way too swollen a yield for retirees to pass up right…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »