1 Passive Income Stock That Could Surge in 2022

Enbridge (TSX:ENB)(NYSE:ENB) is a dividend stud that’s about to get its groove back. Should passive income investors act now or wait it out?

| More on:
money cash dividends

Image source: Getty Images

Passive income stocks may very well be one of the better ways to fight off inflation these days. Undoubtedly, dividends and distributions can help you offset the impact of 3%-5% inflation. With the Bank of Canada (BoC) standing pat in spite of skyrocketing goods prices, it’s clear that Canadians cannot rely on the central bank to help them through these horrific price increases. That’s why it’s better to proactively invest in companies that can help you keep your purchasing power in the green. Sure, gold, Bitcoin, and other alternative assets can provide you with a lower correlation to the broader stock markets and perhaps help you make a considerable amount of cash in the face of soaring inflation. That said, such assets either have a mixed or missing track record when it comes to performance in environments where rates are poised to move higher.

Arguably, gold is the place to be if you think inflation is going to rocket. Still, Bitcoin and other crypto assets have taken their edge away. And it’s really hard to tell if crypto is, in fact, the new gold. It could be, and that would not bode very well for gold’s future. In any case, I think equities are the place to bet to fight inflation. Cheap value stocks with hefty dividends can help you make it through what could be a tough next few years.

Inflation is here. When will it go away? Nobody knows.

Undoubtedly, a dovish surprise could give inflation a free pass to continue hurting our purchasing power. Can the economy stomach a couple of rate hikes? It should, but if it can’t, and central banks can’t finally start raising interest rates, inflation could be the number one risk for investors. Still, many investors may be ill-equipped to deal with persistent inflation, with the belief that it’s just transitory and that it’ll pass with time.

What investors may not realize is that history (look back to the 1970s) suggests inflation isn’t just something that will go away. Like a genie that’s let out of the bottle, some effort needs to be put in to get the genie back in the bottle. Indeed, many have no idea what it was like to invest through inflationary times. It’s tough, and it can be easy to forget, given how long high and persistent inflation can lay dormant. Indeed, the past year of inflation has been incredibly unpleasant. But there is hope for those looking to make it through these awful price increases.

In this piece, we’ll have a look at passive income stocks that can help you win the fight against inflation in 2022.

Enbridge: A top passive income stock to hold forever

Consider Enbridge (TSX:ENB)(NYSE:ENB), a pipeline firm with a colossal 6.3% dividend yield at the time of writing. The dividend is safe and slated to grow at a good pace over the next five years. Undoubtedly, the energy sector is starting to look more attractive again amid rampant inflation and increased demand relative to supply. While Enbridge isn’t as sensitive to oil prices as a producer, it is nevertheless poised to do well as its industry thrives again.

The dividend is a top reason to own the stock. It’s not only large, but it’s of high quality. Management showed in 2020 that it’s willing to do nearly anything to keep its payout alive. Indeed, it would have been easier if the firm had trimmed its hefty payout. But it knows that investors are in the name for solid passive income over time. As such, they’re willing to keep them happy, as they know that bad times do not last forever.

As the tides turn in the firm’s favour again, it’s tough to ignore the stock any longer. It has a tremendous cash-flow-generative business and improving ESG prospects. With a good amount of momentum behind the stock, I’d argue that a return to its glory days is just a matter of time. It’ll be tough to stop the firm as it looks to inch closer to that all-time high not seen in over six years!

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge.

More on Dividend Stocks

Canadian dollars are printed
Dividend Stocks

Transform Your TFSA Into a Cash-Generating Machine With Just $28,000

Canadians can turn their TFSAs into a cash-generating machine with money equivalent to four years’ contribution limits.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

Here’s the Average RRSP Balance at 45 in Canada

The RRSP is a strong tool for investors, but only if you invest in top stocks like this ETF for…

Read more »

Start line on the highway
Dividend Stocks

Retirement Planning: Dividends vs. Growth (Or How About Both?)

Building a healthy mix of income and growth potential in your retirement portfolio is essential. Even if you can't access…

Read more »

Canadian Dollars bills
Dividend Stocks

This 5.44% Dividend Stock Pays You Cash Every Month

Here's a high-yield REIT is ideal for portfolio diversification, not to mention the monthly cash flow streams for income-focused investors.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

2 High-Yield Dividend ETFs to Buy to Generate Passive Income

Both of these ETFs boast double-digit yields and pay on a monthly basis.

Read more »

space ship model takes off
Dividend Stocks

Passive Income: How to Invest Your TFSA Limit in 2025

TFSA income investors still have good options heading into 2025.

Read more »

people relax on mountain ledge
Dividend Stocks

2 Reasons to Buy Gildan Activewear Stock Like There’s No Tomorrow

Here are two main reasons why Gildan Activewear stock could be a great buy now, especially for long-term investors.

Read more »

data center server racks glow with light
Dividend Stocks

Billionaires Are Selling NVIDIA and Picking Up This TSX Stock

Brookfield Corp (TSX:BN) is seeing increased buying by billionaires, while NVIDIA (NASDAQ:NVDA) is seeing increased selling.

Read more »