When buying dividend stocks that you can hold in your portfolio for years, finding high-quality businesses with sustainable payout ratios is one of the most important factors.
Dividend stocks are ideal because, in addition to the capital gains potential they offer, they also start to pay you almost immediately after you buy the stock, especially if you buy a company that pays its dividend monthly.
However, as attractive as that dividend income can be, and as much as investors prefer to buy companies with ultra-high yields, it’s even more important to ensure that the stocks you buy are defensive, reliable, and maintaining sustainable dividends.
A high yield is great, but only as long as it remains sustainable. If a company has to cut its dividend, not only will you receive a lot less passive income from your investment, but the stock price and, consequently, the value of your investment will almost certainly decline.
Plus, in this environment with so much uncertainty and a potential recession on the horizon, it’s even more important to ensure the stocks you’re buying today are high-quality companies with resilient operations.
So with that in mind, if you’re looking for safe income, here’s one of the best dividend stocks in Canada to buy that’s raised its dividend for the past 27 years.
One of the very best dividend stocks to buy on the TSX
Plenty of dividend stocks in Canada offer attractive yields and long-term growth potential, and are also stable and reliable businesses.
With that being said, though, there’s no question that one of the very best passive income generators on the TSX is Enbridge (TSX:ENB), the massive $98 billion energy infrastructure stock.
Enbridge is an incredibly popular dividend stock amongst Canadian investors, and for good reason. First off, it’s a massive business with well-diversified operations that are essential to the North American economy.
For example, Enbridge’s pipelines transport roughly 30% of all the crude oil that’s produced in North America. Furthermore, it also transports roughly 20% of all the natural gas that’s consumed in the U.S. And these aren’t even all its operations.
It also has a natural gas utility business, provides energy storage services, and has a rapidly growing portfolio of renewable energy investments.
So considering how important the services that Enbridge provides are and its significantly diversified portfolio of businesses, there’s no surprise why it’s one of the top dividend stocks on the TSX.
Plus, in addition to all the resiliency that its operations offer, Enbridge is also the largest North American company in an industry that has massive barriers to entry, giving it a significant competitive advantage.
Since it requires so much capital to build a new pipeline, not to mention the significant regulatory hurdles to deal with, these barriers to entry give established companies like Enbridge a major advantage.
Not only that, but typically the larger the company, the more it can take advantage of economies of scale, ultimately improving its efficiency.
So it’s no surprise that as Enbridge continues to invest billions in expanding its operations each year, it’s constantly growing both its earnings and cash flow, which allows it to consistently increase its dividend each year.
Enbridge is one of the best passive income generators in Canada
Since the stock is constantly expanding its operations and increasing the cash flow it generates, it’s not surprising that it has managed to post a dividend growth streak of 27 years, tied for the tenth longest streak in Canada.
A lengthy dividend growth streak is by no means a guarantee that Enbridge will continue to increase its payouts each year. With that being said, though, for 27 years, including through multiple recessions, market crashes and energy price shocks, Enbridge has shown what a resilient business it can be.
And even in the current uncertain environment, Enbridge’s payout ratio is expected to be no higher than 68% this year as its annual dividend payments are $3.55 per share. And according to its own guidance, Enbridge expects to generate distributable cash flow per share of $5.25 to $5.65 this year.
So if you’re looking for safe income in this environment, Enbridge stock now offers a yield of roughly 7.7% and is consistently increasing its payouts each year.
