Dividend investing is a good strategy, especially for investors who seek immediate income. Despite the volatility in the market, a few dividend-paying stocks continue to maintain their payouts and increase the same at regular intervals, making them a reliable source of income in all market conditions.
Fortunately for Canadian investors, the TSX has several top companies that are reliable bets to start a passive-income stream. These companies have well-established businesses, solid fundamentals, and resilient cash flows to support their payouts, regardless of where the market moves.
Against this backdrop, let’s delve into a dividend-paying stock with stellar payout history and offering a compelling yield of 7.5%. But before that, investors must note that dividend payments are tied to the company’s health. Implying it is not guaranteed and could be stopped or reduced. Thus, investors must diversify their portfolios to earn a steady income. With this backdrop, let’s look at Canadian stock, which is my top pick for immediate income.
The top stock offering a 7.5% yield
While the Canadian stock market has several top dividend stocks, one could consider investing in shares of Enbridge (TSX:ENB). The company operates in the energy sector and transports oil and natural gas. This energy infrastructure company also owns a regulated natural gas utility business and has ownership interests in renewable energy facilities.
Thanks to its solid asset base and key role in energy transportation and exports, Enbridge benefits from high utilization and consistently generates solid DCF (distributable cash flows), supporting its payouts. This large-cap stock has a strong dividend payment history (over 68 years). Moreover, it has increased its dividend for 28 consecutive years. In addition, Enbridge stock offers an attractive yield of about 7.5% (based on the closing price of $47.25 on August 18).
Why is Enbridge a reliable stock to earn a steady income?
Enbridge’s highly diversified portfolio and resilient business model enable it to generate strong DCF in all market conditions. Further, its regulated cost-of-service tolling frameworks, low-risk commercial arrangements, and power-purchase agreements help it deliver predictable cash flows supporting its dividend payments.
For instance, Enbridge paid and increased its dividend, even amid the pandemic when most energy companies reduced or paused their payouts due to the erosion of demand.
Further, its two-pronged strategy, including selective investment in both conventional businesses and complementary lower-carbon platforms, like renewables, positions it well to capitalize on energy demand in the long term and enhance shareholders’ returns.
Also, the company is prioritizing investments in low-capital and utility-like growth projects, which will enable it to generate steady cash flows and add stability to its business. Moreover, selective acquisitions will likely accelerate its growth rate.
Bottom line
Thanks to its solid dividend payment history, Enbridge is included in the S&P/TSX Canadian Dividend Aristocrats Index. Moreover, its resilient business, investments in growth projects, and focus on generating predictable cash flows bode well for future growth.
Overall, investors can rely on this Dividend Aristocrat to earn a reliable income. Further, its target payout ratio of 60-70% of DCF is sustainable in the long term and supports my bullish outlook.
