This firm is critical to getting Canada’s oil and gas production to market in the US. It’s also a forward-looking company, having launched one of the world’s first “ultra clean” generation plants using fuel cell technology—The Editors

One of the most prudent and effective ways to generate wealth is to collect regular payments over time from battle-tested businesses with solid long-term growth prospects. The statisticians and market researchers back it up: Dividend accumulation is a critical component of total return, providing essential stability during volatile markets.

According to Standard & Poor’s, dividends are responsible for 44 percent of the S&P 500’s total return—the increase in value if all dividends were reinvested—over the last 80 years. During the last decade dividend income accounted for as more than 50 percent of total return.

Establishing a foundation for long-term wealth is not about simply loading up on the highest-yielding stocks you can find. It’s about buying businesses with the proven ability to sustain their payouts over time. Enbridge (TSX: ENB, NYSE: ENB) boasts an enviable record of consistent dividend growth over the long haul. It’s a dominant player in what is an increasingly essential industry, energy infrastructure.

Every portfolio needs ballast, and this Canadian stalwart has proven its utility dayin, day-out. Enbridge has paid a dividend for more than 55 years. The annualized dividend has grown from CAD0.0075 to CAD1.48 per share, an average of 10 percent per year. The payout ratio on a trailing 12-month basis is 59.9 percent, on the low end of management’s target range of 60 to 70 percent of earnings.

Enbridge is Canada’s largest transporter of crude oil, with about 15,280 kilometers (9,500 miles) of pipeline, delivering more than two million barrels per day of crude oil and liquids.

It exports 69 percent of western Canadian oil production, or about 11 percent of the US’s daily imports. Close to 100 different types of commodities and fuels—including more than 20 refined products—move through its network.

Enbridge, which reports second-quarter results on July 28, has made a concerted effort in recent years to broaden its portfolio by investing in alternative energy projects. Enbridge, Enbridge Gas Distribution and FuelCell Energy (NSDQ: FCEL) opened what was described as the world’s first direct fuel cell-energy recovery generation power plant to operate in Canada. The Toronto facility produces 2.2 megawatts of “ultra-clean electricity,” enough power for approximately 1,700 residences. Management estimates the North American market represents 250 to 300 megawatts of opportunities for direct fuel cell-energy recovery generation systems.

The company recently announced a USD500 million investment in a 250 megawatt wind energy project in Colorado. Construction on the Cedar Point Wind Energy Project, approximately 80 miles east of Denver, is expected to be complete in late 2011. The project will deliver electricity to the Public Service Company of Colorado (PSCo) electricity transmission grid under a 20-year, fixed-price power purchase agreement.

Sitting just below a recent new high, the shares will likely pull back at some point during what’s likely to be a summer of choppy trading.—David Dittman

Why to Buy

• Consistent dividend growth
• Manageable payout ratio
• Market leader