Most investors tend to focus on investing in companies headquartered in their home country. That can cause them to miss out on some excellent international investing opportunities.
Canada has some great investment options, especially for income-seeking investors. Energy infrastructure companies Enbridge(NYSE: ENB), TC Energy(NYSE: TRP), and Pembina Pipeline(NYSE: PBA) all pay attractive dividends that have steadily grown over the years. With more growth ahead, investors will want to take advantage of these high-quality income stocks.
Lots of growth ahead
Enbridge currently offers a dividend yield right around 7%. While its payout fluctuates a bit with foreign exchange rates, the company has an elite track record of growing its dividend. Enbridge delivered its 28th straight year of dividend increases in late 2022.
The pipeline and utility giant backs its high-yielding payout with a strong financial profile. It generates very stable cash flow and pays out a conservative 60% to 70% via the dividend. It has a solid investment-grade balance sheet backed by a low leverage ratio. Leverage was 4.6 at the end of the first quarter, toward the low end of its 4.5-5.0 target range. This strong financial profile gives Enbridge the flexibility to continue expanding its operations.
Enbridge currently has 17 billion Canadian dollars ($12.9 billion) of commercially secured expansion projects in its backlog. These projects should come online through 2028, with more than CA$10 billion ($7.6 billion) scheduled to enter service in 2025 and beyond. The company also has a growing pipeline of projects under development to drive growth in the back half of this decade.
Enbridge expects these projects will grow its cash flow per share by 3% annually through 2025 and by around a 5% annual rate after that. That should fuel dividend growth at a similar annual pace.
No shortage of expansion opportunities
TC Energy's dividend currently yields around 6.8%. The natural gas pipeline giant has increased its payout for 23 straight years. The company expects to grow its payout at a 3% to 5% annual rate over the coming years.
Two factors fuel that view. First, TC Energy has a solid financial profile. It generates very stable cash flow and pays out a reasonable percentage via its dividend (it projects to pay out 50% of funds generated from operations in the 2023-2026 timeframe). While leverage ended last year above 5.0 as the company funds expansions, TC Energy expects earnings growth and asset sales to bring it down in the coming years.
Meanwhile, TC Energy has plenty of fuel to increase its earnings and dividend in the future. While it's in a very heavy investment phase right now, it plans to limit capital spending to CA$7 billion ($5.3 billion) annually after next year by focusing on its highest value opportunities. That discipline will allow it to keep leverage down so it can maintain a strong financial profile.
A rock-solid and rising passive income stream
Pembina Pipeline's dividend currently yields around 6.2%. The company is an ideal income stock because it pays a monthly dividend. While the Canadian pipeline company hasn't increased its payout every year, it has grown the dividend at a 5% compound annual rate over the past decade.
The company backs that payout with a strong financial profile. It has investment-grade credit with a low leverage ratio that should be between 3.3 and 3.6 this year, putting it at or below its 3.50-4.25 target range. Meanwhile, it has a low dividend payout ratio of 57% of its earnings.
Pembina has lots of growth ahead. It has CA$1.3 billion ($1 billion) of capital projects underway and another CA$4 billion ($3 billion) under development. These projects will help grow its cash flow in the future, giving it more fuel to increase the dividend.
Pipe some international passive income into your portfolio
Most income investors are probably familiar with the leading U.S. pipeline companies because of their attractive dividends. However, many investors might have missed that Canada has some high-quality pipeline stocks, led by Enbridge, TC Energy, and Pembina Pipeline. They each pay a high-yielding dividend that has steadily risen over the years. With more dividend growth ahead, income investors should consider adding one to their portfolios.
10 stocks we like better than Enbridge
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Enbridge wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 12, 2023
Matthew DiLallo has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Pembina Pipeline and Tc Energy. The Motley Fool has a disclosure policy.
