Investors seeking steady passive income could consider investing in top Canadian dividend stocks. The TSX has several fundamentally strong stocks that can help you generate steady income for decades.
Additionally, using a TFSA (Tax-Free Savings Account) to invest in these top dividend stocks can enhance overall returns, as dividend income is tax-free within a TFSA. It’s worth noting that the TFSA contribution limit is $7,000 for 2024.
So, if you plan to invest $7,000 to start a passive-income stream, here is a top dividend stock that can help you earn $519 per year.
A top Canadian dividend stock
While the TSX has many high-quality dividend stocks, TFSA investors could consider adding Enbridge (TSX:ENB) to their portfolio. Enbridge is a top energy infrastructure company that transports oil and gas. It boasts a stellar track record of dividend payments (over 69 years) and has uninterruptedly increased dividends for 29 consecutive years.
The company’s solid dividend payouts show its commitment to enhancing its shareholders’ returns regardless of economic and commodity cycles. For example, Enbridge was among the few energy companies that consistently paid and even increased its dividend during the 2008 economic recession and COVID-19 pandemic.
Besides its resilient payouts, Enbridge stock offers a compelling dividend yield of 7.4% based on its closing price of $49.27 on June 4. Additionally, Enbridge has visibility over its distributable cash flows (DCF) growth, which supports its future dividend payments.
Against this background, let’s explore why Enbridge could be a reliable investment for passive-income investors.
Why rely on Enbridge’s payouts?
Enbridge possesses high-quality energy infrastructure assets and plays a significant role in North American energy transportation. This ensures that its assets consistently experience high utilization, driving its earnings and distributable cash flows (DCF).
The company benefits from diversified revenue streams, power-purchase agreements, long-term contracts, and arrangements that mitigate volume and price risks. Notably, Enbridge’s management prioritizes dividend growth as a core component of its value proposition to investors. This demonstrates Enbridge’s strong commitment to consistently returning cash to shareholders.
In the future, Enbridge’s earnings per share (EPS) is expected to grow at a compound annual growth rate (CAGR) of 4-6% through 2026. During the same period, its DCF per share is projected to increase by 3%. Beyond 2026, the energy giant’s EPS and DCF per share are forecasted to grow at a CAGR of approximately 5%. This suggests that Enbridge will likely increase its dividend by low to mid-single-digit rates in the upcoming years.
While Enbridge is well-positioned to enhance its shareholders’ returns through higher dividend payments, its targeted payout ratio of 60-70% of DCF is sustainable in the long run.
These positive factors suggest that Enbridge’s dividend can be relied upon and supports my optimistic outlook on the stock.
Earn $519 per year with Enbridge stock
Enbridge is a solid dividend stock that can help investors earn a worry-free passive income, which will grow with them. The table below illustrates that an investment of $7,000 can help you own approximately 142 shares of Enbridge near the current price levels. With Enbridge’s quarterly dividend of $0.915 per share, this investment can generate about $129.93/quarter or over $519 annually in passive income.
| Company | Recent Price | Number of Shares | Dividend | Total Payout | Frequency |
| Enbridge | $49.27 | 142 | $0.915 | $129.93 | Quarterly |
