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Dividend Investing: A Reliable Income Stream?

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  Published in Stocks and Investing on Thursday, January 29th 2026 at 10:50 GMT by The Motley Fool Canada
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The Appeal of Dividend Investing

Dividend investing involves purchasing shares of companies that regularly distribute a portion of their profits to shareholders. These payments, known as dividends, provide a consistent income stream, independent of stock price fluctuations. In an era of low interest rates, dividend stocks can be particularly appealing for those seeking reliable income.

However, it's essential to understand that dividend yields aren't guaranteed. Companies can reduce or eliminate dividends, especially during economic downturns. Therefore, selecting financially stable companies with a proven track record of dividend payments is paramount.

Two TSX Stocks to Consider

Based on data as of January 26, 2026, two TSX stocks stand out as potential contenders for a dividend-focused portfolio: Enbridge (TSX: ENB) and Toronto-Dominion Bank (TSX: TD).

Enbridge: A Pipeline Powerhouse

Enbridge is a leading North American energy infrastructure company, primarily involved in the transportation and distribution of oil and natural gas. As of January 26, 2026, Enbridge boasts a dividend yield of 7.57%. This means that for every $100 invested in Enbridge stock, an investor can expect to receive $7.57 in annual dividends.

To generate $1,937 in annual dividend income solely from Enbridge, an investment of approximately $25,500 would be required ($1937 / 0.0757 = $25,500). Enbridge's strong position in the energy sector, coupled with its history of consistent dividend payments, makes it a relatively stable option for income-focused investors. The company's infrastructure assets provide a degree of protection against market volatility.

Toronto-Dominion Bank: A Canadian Financial Institution

Toronto-Dominion Bank (TD) is one of Canada's largest banks, known for its strong financial performance and conservative lending practices. As of January 26, 2026, TD offers a dividend yield of 4.37%. This translates to $4.37 in annual dividends for every $100 invested.

To achieve $1,937 in annual income solely from TD, an investment of approximately $44,445 would be necessary ($1937 / 0.0437 = $44,445). TD's solid financial foundation and commitment to returning capital to shareholders make it a reliable dividend payer. The bank's diversified operations and focus on risk management further enhance its stability.

A Balanced Approach: Portfolio Allocation

Given a $30,000 investment budget, allocating the entire sum to either Enbridge or TD wouldn't be optimal to reach the $1,937 income goal. A diversified approach, combining both stocks, provides a balance between yield and stability.

An example allocation would be to invest approximately $25,500 in Enbridge, generating around $1,937 in annual dividends. The remaining $4,500 could then be invested in Toronto-Dominion Bank. This strategy allows investors to maximize their dividend income within the $30,000 budget. It's important to regularly review the portfolio and adjust allocations as market conditions change and dividend yields fluctuate.

Important Considerations and Risks

While this strategy offers the potential for generating significant passive income, it's vital to acknowledge the inherent risks. Stock prices can decline, impacting the overall value of the investment. Dividend yields are not guaranteed and can be reduced or eliminated by the company. Economic downturns and industry-specific challenges can also affect the performance of these stocks.

Furthermore, tax implications should be considered. Dividends are typically taxed as income, so investors should factor this into their overall financial planning. Diversification across different sectors and asset classes is crucial to mitigate risk.

Disclaimer: Investing in the stock market involves risks, and past performance is not indicative of future results. This is not financial advice, and you should consult with a financial advisor before making any investment decisions.