High-yield dividend stocks are attractive investments for earning passive income. While the TSX has several stocks offering high yields, only a few are worth buying and holding for decades as they offer well-covered payouts and management teams dedicated to enhancing shareholder value.
Against this background, let’s look at a Canadian stock offering a high and well-protected yield of 6.9%. Investors can rely on this fundamentally strong company to earn worry-free passive income for decades.
The 6.9% dividend yield stock
For investors eyeing high-quality dividend stocks, Enbridge (TSX:ENB) stands out for its consistent record of dividend payments and growth. The energy company has paid dividends uninterrupted for over 69 years and increased them for 29 consecutive years. The company’s dividend has grown at an impressive 10% annual rate during this time, which shows the resiliency of its payouts and management’s commitment to enhancing shareholders’ value.
This energy company offers a quarterly dividend of $0.915 per share, translating to a yield of 6.9%, based on its closing price of $53.35 as of August 19.
Why Invest in Enbridge stock?
Enbridge isn’t just a solid investment because of its impressive past performance and high yield. The company’s future earnings per share (EPS) and distributable cash flow (DCF), which drive its payouts, are expected to grow. This means Enbridge will likely increase its dividends in the years ahead.
As a leading energy infrastructure company, Enbridge is a crucial oil and gas transporter across North America. Its extensive network of liquid pipelines serves as an essential link between key supply basins and major demand centres, such as refinery hubs. This strategic positioning allows Enbridge to maintain high utilization rates across its existing network, creating a solid foundation for consistent earnings and DCF per share growth.
Further, Enbridge’s assets are supported by long-term contracts, power-purchase agreements (PPAs), regulated cost-of-service tolling frameworks, and other low-risk commercial arrangements. These factors enable the company to generate stable and resilient cash flows, even during economic uncertainty or fluctuating commodity prices. This financial stability enhances the durability of Enbridge’s dividend payouts, providing investors with a reliable income stream.
Enbridge is committed to expanding its earnings base through investments in both conventional and renewable energy assets. These strategic investments position the company to capitalize on future energy demand while diversifying its revenue streams. Additionally, Enbridge’s strong balance sheet will enable it to pursue strategic acquisitions, which will further enhance its cash flows.
Enbridge’s secured growth backlog now stands at an impressive $24 billion, supported by commercial frameworks aligned with its low-risk business model. Moreover, the company focuses on low-capital-intensity growth projects and regulated utility or utility-like investments. Furthermore, Enbridge is improving its cost structure and implementing productivity initiatives to drive earnings, which will support future dividend payouts.
Bottom line
Enbridge is a top passive-income stock due to its solid dividend payment history, high yield, resilient payouts, and growing earnings base. Enbridge’s management expects to grow its EPS and DCF per share at a mid-single-digit rate over the long term, which will help increase its future dividend. Moreover, its payout ratio of 60-70% of DCF is sustainable, making Enbridge a reliable high-yield stock for income investors.
