Comfort Against Market Volatility: Two Great Dividends
By
Rida Morwa
2 Great Dividends To Earn A Lifetime Of Passive Income
Summary
Fear of the unknown is a strong motivator.
Being an income investor means often being at odds with the general market sentiment.
My retirement will be paid for by dividends, and yours can be as well.
About 28% of adults in the United States experience some visual height fear, which may be a natural survival instinct. Similarly, fear of the unknown may cause retirees or individuals to avoid the stock market.
However, the stock market remains the greatest wealth-generating tool in history, and investors can find suitable investments to meet their needs. With commission-free trading and investing apps, the stock market has become more accessible. Today, we will explore two safer investment opportunities that provide comfort against market volatility.
Pick #1, OBDC - Yield 10%
Blue Owl Capital Corporation (OBDC) has had an impressive quarter, paying dividends more frequently, which we fully support. The "regular" dividend will remain at $0.33 in October, while the "supplemental" dividend has been raised to $0.07 and will be paid in September. This means that the Q2 dividend will be 29% higher compared to the previous year.
Furthermore, Net Investment Income (‘NII’) dividend coverage has increased from to 120%, indicating that OBDC is performing well in terms of dividends. The BDC reported improved NII, book value, and dividend coverage, all while impressively reducing leverage to 1.14x.
Despite this, the share price has remained relatively unchanged from a year ago, and OBDC is still trading at a discount to Net Asset Value (‘NAV’). Nevertheless, we are growing our income stream while waiting for the market to realize the value it has left on the table.
Pick #2, ENB – Yield 7.6%
Enbridge Inc. (ENB) is a Canadian energy company that specializes in the transportation, distribution, and generation of hydrocarbons such as crude oil, natural gas, and associated liquids. They transport around 30% of the crude oil produced in North America and approximately 20% of the natural gas consumed in the United States. Enbridge also operates North America's third-largest natural gas utility by consumer count, making it a critical player in energy distribution.
Enbridge reported record mainline volumes, resulting in an impressive 7.7% YoY Earnings Before Interest, Tax, Depreciation and Amortization (‘EBITDA’) and 2.5% DCF growth. They have executed over $1 billion of accredited tuck-in acquisitions this year, fortifying its leadership in the industry. Over 95% of ENB’s customers have investment-grade financial ratings, and the company maintains high cash flow predictability with 51% tied to take-or-pay contracts and 47% associated with its regulated gas distribution business.
Enbridge's investment-grade BBB+ rated balance sheet with a debt-to-EBITDA of 4.5x is at the low end of the company's targeted range. Enbridge boasts 28 consecutive years of dividend increases and projects a 5% CAGR EBITDA growth through 2025. The company has many new projects that will become operational in the coming years, directly accretive to EBITDA and Distributable Cash Flow (‘DCF’) growth through long-term contracts with credit-worthy customers. ENB’s 7.6% yield presents a solid and sustainable income opportunity for years ahead.
Conclusion
Investing in these two companies can provide you with a reliable and strong source of income. As you approach retirement, you don't want to have to constantly adjust your investment portfolio or worry about risky investments made by gambling-type investors. Instead, you should be enjoying your time relaxing, exploring new hobbies, or spending time with loved ones.
Investing for income allows you to earn significant amounts of money from the market to pay for your expenses. This means that you can consider yourself a professional investor and proudly state that your retirement is funded by dividends. This is the essence of my Income Method and income investing.
