Enbridge title earns 8%
Enbridge is the largest North American energy infrastructure company with an extensive network that transports and stores oil and gas across the continent.
The industry leader provides customers with low-cost access to the best North American and export markets. Not surprisingly, it transports about 25% of crude oil to North America and supplies about 20% of natural gas to the United States.
In addition, its gas distribution business has approximately 3.8 million meter connections in Ontario, which is a good province to operate.
Enbridge’s essential services continue to operate during the COVID-19 period, enabling it to generate resilient cash flow to maintain its juicy yield of 8%.
The stable dividend stock would be worth around $ 55 per share in a normal market environment. Consequently, it is trading at a significant discount of around 27% with medium-term upside prospects of around 37%.
The $ 10,000 investment in Enbridge will generate passive income of approximately $ 806 per year for beginners. Let us not forget that it also tends to increase its dividend, as it has done for more than two decades!
Going forward, Enbridge plans to increase its distributable cash flow per share by approximately 5-7% per year. It is therefore possible for him to also increase his dividend within this range.
Capital Power shares earn 7%
The first thing you notice about Capital Power is that it offers a big return of around 7.15%. The electric company is part of the IShares S & P / TSX Capped Utilities Index.
Seeing like FNB iShares S & P / TSX Capped Utilities Index Only 3.5% return, an interested investor may wonder why Capital Power offers twice the return of the ETF. It turns out that the public service has significant exposure to Alberta, where it generates almost 46% of its EBITDA.
However, the electricity producer reduced the risk by contracting a large part of its EBITDA. More specifically, approximately 83% of its adjusted EBITDA is contracted, including 29% of Alberta’s EBITDA, 28% from the United States and 26% from other regions of Canada.
In addition, it covered 91% of Alberta’s base generation for the rest of the year at $ 50 / MWh, which is higher than the futures price of $ 48 / MWh.
An investment of $ 10,000 in Capital Power will generate an initial annual income of approximately $ 715. Notably, however, the public service is a young Canadian dividend aristocrat with a six-year dividend growth sequence. Its 7.2% annual dividend growth rate over five years is also impressive.
Capital Power has reaffirmed its outlook for 2020 and plans to increase its dividend by 5 to 7% per year until 2022. This suggests that the stock could generate a total return of around 13% per year until 2022, excluding any multiple expansion. Analysts believe the stock is about 20% undervalued.
Low interest rates have reduced interest income for Canadians. As a result, some are forced to explore the higher risk stock market for higher income.
Enbridge and Capital Power immediately provide above average income. In addition, the shares are updated and they expect to increase their dividends in the coming years.
Nevertheless, investors should do more research on companies to decide if they are suitable for their investment portfolios.
Speaking of dividends, don’t forget to check them …
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The contributing contributor Kay Ng holds shares in CAPITAL POWER CORPORATION and Enbridge. The Motley Fool owns shares and recommends Enbridge.