Retirement is when most of us hope to realize our dreams. Maybe that's a trip around the world or spending more time with a favorite hobby or the grandkids. No matter the retirement dream, it's easier to make it a reality by having a steady income stream. One of the ways to have that financial freedom in retirement is by owning a portfolio of solid dividend-paying stocks.
While plenty of stocks fit the bill, an excellent one to consider owning is Enbridge (ENB -0.58%). That's because the Canadian energy infrastructure giant pays a generous dividend supported by a predictable income stream and solid balance sheet. Even better, it expects to increase that lucrative payout at a 10% annual rate for at least the next three years, which will provide a retiree with more cash to do what they want in retirement.
A great going in rate
Enbridge has treated dividend investors well over the years. The pipeline giant has now increased its payout for 23 consecutive years -- if we include 2018's planned 10% raise. Furthermore, those increases have been very generous considering that the company has boosted its payout by an 11.2% compound annual growth rate over the past two decades, including giving investors a 15% raise earlier this year. Those sizable increases are one reason why it pays such an attractive dividend right now, with it yielding a well above-average 4.8%.
That high-yield dividend is on a very sound foundation. For starters, roughly 96% of Enbridge's cash flow comes from predictable sources like long-term, fee-based contracts. Meanwhile, the company only pays out about 65% of its available cash flow from operations, which provides it with excess to help finance growth projects that have been the key to fueling dividend growth over the years. Additionally, the company has a solid balance sheet, backed by an investment-grade credit rating. In fact, the company is in the process of strengthening its financial situation by selling as much as 10 billion Canadian dollars ($7.9 billion) of non-core assets over the next few years, including CA$3 billion ($2.4 billion) by the end of 2018. That improving balance sheet will put its dividend on an even firmer foundation.
A higher rate in the years to come
Not only does Enbridge pay a high-yielding dividend now but that payout should grow at a high rate for the next several years. That's because it currently has a stunning CA$31 billion ($24.4 billion) of expansion projects under way, which the company expects will drive 10% annual growth in cash flow per share through 2020, supporting its forecast for 10% yearly dividend increases over that time frame.
Meanwhile, Enbridge shouldn't have a problem continuing to grow its payout in the coming decades. That's because the U.S. and Canada need to invest nearly $550 billion through 2035 on new energy infrastructure, according to one study. Given that Enbridge is currently the largest company in this space, it has a leg up on the competition to secure projects that will expand its vast network. In fact, the company recently announced that it would partner with refining giant Phillips 66 (PSX -0.96%) and build a large oil pipeline in Texas. The 385,000 barrel a day Grey Oak Pipeline would connect oil supplies from western Texas to refining capacity along the coast, including facilities owned by Phillips 66. The partners anticipate that the project will enter service in the second half of 2019, which will provide both with additional cash flow while helping Phillips 66 gain greater access to cheaper U.S. oil supplies. That project is just one of several Enbridge has announced this year and is far from the last it will unveil in those to come.
A dream combo for retirees
Enbridge has been a great income-stock for investors over the years and should continue being one in the future. That's because it has a rock-solid high-yield dividend that it can grow at a high rate for many more years, which makes it a dream stock for those who need income in retirement.