Dividend stocks are popular among investors, as they provide
a predictable stream of income as well as the opportunity to benefit via
long-term gains. However, not every company that pays a dividend is a good
investment. As dividend payments are not a guarantee, you need to analyze the
financials of the company to deduce if it’s a good stock to hold.
One blue-chip Canadian stock is Enbridge (TSX:ENB)
(NYSE:ENB) . This energy giant has a diversified base of cash-generating assets
that has allowed it to increase dividends at an annual rate of 11% in the last
25 years.
In 2020, energy companies have been decimated due to
COVID-19. This has meant Enbridge stock is trading 29% below its 52-week high,
but it also provides investors with a tasty dividend yield of 8%. So, if you
invest $5,000 in Enbridge stock today, you will generate $400 in annual
dividend payments.
If the company increases these payouts at an annual rate of
5% over the next two decades, your dividends will increase to over $1,000 per
year at the end of the forecast period. Further, you will also benefit from
long-term capital gains, and we can see how quality dividend stocks can create
substantial wealth for investors.
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